IBBI Proposes Vital Changes to Support MSMEs

In an inspiring move to bolster Micro, Small, and Medium Enterprises (**MSMEs**), the **Insolvency and Bankruptcy Board of India (**IBBI**) is taking significant strides by proposing fresh amendments to the corporate insolvency regulations. This initiative is all about making sure that MSMEs get the support they truly deserve during tricky financial times.

Key Amendment Details

Under the new proposal, corporate debtors (**CDs**) will be required to disclose, right from the start of the resolution process, whether they are registered as MSMEs under the **Micro, Small, and Medium Enterprises Development Act of 2006**. This clarity is expected to minimize information gaps in the resolution process for MSMEs.

To kick things off, IBBI has released a discussion paper focusing on the **MSME Registration and Disclosure Framework** under the **Corporate Insolvency Resolution Process (CIRP)**. Stakeholders are invited to share their thoughts, with the deadline for electronic comments set for September 12.

Encouraging Participation and Maximizing Value

The IBBI envisions this new requirement as a way to boost engagement from potential resolution applicants. Many might have hesitated due to uncertainty around eligibility, but by providing explicit clarity at the time of issuing the **Information Memorandum (IM)**, more applicants are likely to step forward. This, in turn, could lead to better outcomes and increased value maximization, according to the discussion paper.

Additionally, if documents indicate that a **Corporate Debtor** qualifies as an MSME, the **Resolution Professional (RP)** may obtain the **Udyam Registration Certificate** on a case-by-case basis prior to finalizing disclosures in the IM. This tailored approach helps ensure that the unique attributes of MSMEs are acknowledged.

The Importance of MSMEs

MSMEs are the backbone of the Indian economy, making significant contributions to employment and GDP. Recognizing their importance, the **Insolvency and Bankruptcy Code (IBC)** already offers special provisions for MSMEs facing insolvency challenges.

Expert Opinions

**Hari Hara Mishra**, CEO of the **Association of ARCs in India**, emphasized that having clarity on the status of a corporate debtor as an MSME from the outset of the CIRP process can generate increased interest from potential resolution applicants. “This move could potentially save small units from liquidation if resolution plans are not in place,” he remarked.

Similarly, **Jyoti Prakash Gadia**, Managing Director at **Resurgent India**, welcomed IBBI’s proposal, stating that incorporating disclosure about the status and classification of a CD as an MSME is indeed a positive step. His sentiment echoed the need for clear information for all parties involved in the CIRP process.

Gadia also noted that this should have been a straightforward and essential addition to the IM disclosures long before, especially after the establishment of special exemptions and a unique ‘prepackaged scheme for resolution of MSME sector cases’ under the code.

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