Pre-packaged insolvency for small & medium firms

A notable feature of the ordinance is the pre-packaged process' two-step voting structure

Pre-packaged insolvency (or “pre-pack”) refers to the process by which a distressed corporation formulates a resolution plan with its creditors and a purchaser before the initiation of insolvency proceedings. On April 4, 2021, Government of India promulgated an ordinance introducing pre-packaged insolvency for Micro, Small, and Medium Enterprises (MSMEs).

The framework of the ordinance governs the pre-formal and the formal stages of pre-packs. The formal stage commences once an application for pre-packaged insolvency has been filed. At the pre-formal stage, an MSME can negotiate a “base resolution plan” with its creditors and a purchaser. Prior to filing the plan and commencing