What is the resolution process for stressed MSMEs?
The resolution process for stressed MSMEs is a fast-track insolvency process that is designed to help small and medium-sized enterprises (SMEs) that are in financial distress but are still viable. The process is similar to the pre-packed insolvency process, but it has some additional features that make it more suitable for SMEs.
What are the benefits of the resolution process for stressed MSMEs?
The benefits of the resolution process for stressed MSMEs include:
- It is a faster process than the traditional insolvency process.
- It can save the SME from liquidation.
- It can preserve the value of the SME’s assets.
- It can protect the interests of the SME’s creditors.
Who can initiate the resolution process for stressed MSMEs?
The resolution process for stressed MSMEs can be initiated by any of the following:
- The SME itself
- A majority of the SME’s creditors
- The Resolution Professional (RP)
What are the steps in the resolution process for stressed MSMEs?
The steps in the resolution process for stressed MSMEs are as follows:
- The SME and its creditors agree on a restructuring plan.
- The plan is submitted to the National Company Law Tribunal (NCLT) for approval.
- The NCLT holds a hearing on the plan.
- If the plan is approved, the SME is restructured and continues to operate.
Multiple choice questions:
- Which of the following is not a benefit of the resolution process for stressed MSMEs?
- It is a faster process than the traditional insolvency process.
- It can save the SME from liquidation.
- It can preserve the value of the SME’s assets.
- It can protect the interests of the SME’s employees.
The answer is It can protect the interests of the SME’s employees. The interests of the SME’s employees are not a priority in the resolution process for stressed MSMEs. The priority is to restructure the SME and save it from liquidation.
- What is the role of the Resolution Professional (RP) in the resolution process for stressed MSMEs?
The RP is a professional who is appointed by the NCLT to oversee the resolution process for stressed MSMEs. The RP’s role is to facilitate the negotiation of the restructuring plan and to submit the plan to the NCLT for approval.
- What is the order of priority for the distribution of proceeds in the resolution process for stressed MSMEs?
The order of priority for the distribution of proceeds in the resolution process for stressed MSMEs is the same as the order of priority for the distribution of proceeds in liquidation. This means that secured creditors are paid first, followed by priority creditors, unsecured creditors, and then shareholders.