Explained | Will pre-packaged bankruptcy terms help small businesses?

The latest amendments to the IBC, 2016 allow the use of “pre-packs” to resolve insolvency proceedings involving micro, small and medium-scale enterprises. A pre-pack is a way of resolving the troubles of creditors and owners of a distressed business.

What are the amendments to the Insolvency and Bankruptcy Code passed by Parliament and will it ease the process for distressed MSMEs? On July 28, , making into law amendments made to the IBC, 2016. The latest amendments allow the use of “pre-packs” to resolve insolvency proceedings involving micro, small and medium-scale enterprises. According to the amendments, the government has notified a threshold for default – not exceeding ₹1 crore -- at which point a pre-packaged resolution process may be initiated. Pre-packs, which are popular in many developed countries, are seen as a smoother way to resolve bankruptcies unlike the conventional insolvency resolution process.