Government plans pre-packaged IBC deals to ease load

MUMBAI:The pause in bankruptcy resolutions because of the pandemic has prompted government to legislate changes to the insolvency code to fast-track processing of cases where a restructuring plan has been agreed in advance between the company and its creditors, two people aware of the development said.

The so-called pre-packaged insolvency procedure, or prepack, will also help ease the burden on bankruptcy courts, once the changes to the Insolvency and Bankruptcy Code (IBC) are approved by Parliament.

“Pre-packs are probably intended to lower the burden of courts and effectively come out with an alternative solution,” said Shardul Shroff, executive chairman at law firm Shardul Amarchand Mangaldas and Co.

A huge backlog of cases at National Company Law Tribunal (NCLT) benches have stretched resources and led to delays in resolution of cases. The current covid-19 crisis has only added to the delays. A pre-pack resolution will help shorten the long-winded court process. It will also reduce uncertainty on whether the stressed assets will draw interest from bidders and whether lenders will accept their bids.