The Centre Sets ₹10 Lakh Trigger for MSME Rescue Scheme. This simplified scheme of MSME Rescue came for bankruptcy proceedings of small businesses called Pre-Packs. The finance ministry said that under this Pre-Pack Scheme, this would be the minimum threshold of payment default for the Micro, Small, and Medium Enterprises (MSMEs). However, if you’re not registered for MSME yet then, you won’t be able to take benefits of this scheme. And, we provide a one-stop solution for all requirements regarding MSME like MSME Registration and others. In this article we will discuss in detail Centre Sets ₹10 Lakh Trigger for MSME Rescue Scheme.
Highlights of MSME Rescue Scheme
- As this Rescue Scheme or Pre-Pack Scheme came into existence, the finance ministry tweeted and stated that this would be the minimum amount of payment for MSMEs.
- If the payment default criteria are met, in the case of the large companies, one lender could initiate proceedings against the defaulter, even.
New Pre-Pack Scheme for MSMEs?
According to the Pre-Pack Scheme for MSMEs, it is a hybrid corporate rescue process. In addition to that, it also blends elements and virtues of both formal and informal insolvency proceedings.
Under this scheme, INR 10 Lakh Trigger for MSME Rescue Scheme has been allotted as a resolution plan. Due to the COVID-19 pandemic, almost every MSME has gone bankrupt. And, in a resolution plan, it is a provision to negotiate before the commencement of formal proceedings between the debtor and their creditors.
This new threshold is much lower than the INR 1 Crore threshold of a payment default. Otherwise, it is applicable for initiating bankruptcy proceedings in the case of non-MSME businesses under the IBC (Insolvency & Bankruptcy).
What’s for Large Companies?
Well, the announcement also adds the payment default criteria for the case of large companies too. In this case, even one lender can initiate the proceedings against the defaulter. Moreover, in the case of MSMEs, at the creditors accounting for 66% of business’ debt, the process only can be started.
However, for this new Pre-Pack Scheme, a voluntary initiation would require the approval of 75% of shareholders. Besides, those creditors representing 66% of debt must back this.
How It Came into Existence?
The Indian government brought this Pre-Pack Scheme after they brought an amendment to IBC by way of an Ordinance on Monday. In Ordinance, the stress and economic downturn caused by the pandemic to the small businesses. However, this scheme also takes some special circumstances in which MSMEs function into accountability.
As per the government passed Ordinance for MSMEs and large companies, the MSMEs and large companies now get minimum threshold.
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