Key Points
Pre-packaged insolvency resolution processes, or pre-packs, were introduced to Indias Insolvency and Bankruptcy Code (IBC) in April 2021 with the goal of giving micro, small and medium enterprises (MSMEs) a fast, cost-efficient and effective way to resolve financial stress. ..
Debtors and creditors are expected to put an early effort into resolving a troubled MSMEs liquidity problems quickly..
The pre-insolvency regime is especially important for MSMEs, which have simple business structures and cant absorb sudden disruptions..
Pre-packs need not mirror the usual insolvency resolution processes..
If MSME debtors are granted concessions, entrepreneurs are less likely to be deterred from pursuing business ventures by the fear of insolvency, knowing that they could quickly recover from their mistakes or market reversals and re-enter the marketplace..
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