The rules specify that the resolution professional and all partners and directors of the insolvency professional entity have to be independent of the debtor.
The Insolvency and Bankruptcy Board of India (IBBI) on Friday notified the regulations for the recently announced pre-packaged insolvency resolution process, introduced to provide an easier path to resolution for stress Micro, Small, and Medium Enterprises (MSMEs).
Among the key aspects of the rules is the continued independence of the resolution professional. According to the rules, an insolvency professional can be appointed as resolution professional if they are independent of the corporate debtor blocking any person or entities that are related to the debtor.
The rules specify that the resolution professional and all partners and directors of the insolvency professional entity have to be independent of the debtor.
A person will be treated as independent if they are eligible to be appointed as an independent director on the board of the debtor, are not a related party of the debtor, and not an employee or proprietor or a partner of the debtor.The Centre had introduced the new system by way of an ordinance on April 4 which amended the Insolvency and Bankruptcy Code (IBC) to introduce the a pre-pack process.
The MSME sector has been among the most severely affected segments of the Indian economic engine and analysts welcomed a system that would help MSMEs more easily navigate the maze of the IBC-driven system.
The corporate affairs ministry said that the new system would “provide an efficient alternative insolvency resolution framework for… MSMEs”. This, it added, would help ensure a positive signal to the debt markets, lead to employment preservation, an improvement in ease of doing business and the preservation of enterprise capital.
