A senior bank official said that State-Bank of Maharashtra is trying to resolve 20-25 stressed micro, small and medium enterprise (MSME) accounts under the pre-packaged insolvency resolution process.
Earlier this month, the government amended the insolvency law to begin a pre-packaged insolvency resolution process for stressed MSMEs.
Under a pre-packaged process, key stakeholders such as creditors and shareholders come together to identify a potential buyer and negotiate a resolution plan before going to the National Company Law Tribunal (NCLT).
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“With the outbreak of the COVID crisis, tensions over hospitality, luxury retail, tour operators, lodging and restaurant operators have increased significantly. I expect the emphasis on resolving around 20-25 MSME accounts under pre-packaged insolvency resolution Will go. In the coming months, “said Sanjay Rudra, General Manager (Credit – Large and Central Corporate, MSME) of Bank of Maharashtra.
He was speaking at a webinar organized by MVIRDC World Trade Center, Mumbai and All India Association of Industries.
He said that under the pre-packaged insolvency resolution system, the government has given MSMEs a chance to resolve their stress at an early stage while keeping control of their business.
“Now, MSMEs should have complete transparency in the entire resolution process to gain credibility and trust of lenders,” Rudra said.
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Speaking on the webinar, AZB and Partners cofounder Bahram N. Vakil said that the promoters of MSME should file for a solution with NCLT only after having a strong base plan.
“If promoters can come out with a resolution plan with the lowest possible haircut for operational creditors and if it is also acceptable to the creditors’ committee, then the Swiss challenge auction is less likely to have such plans,” he said. .
Assuming that the promoters and bankers of MSMEs should work on the discovery of the fair value of the underlying asset, Wackill stated that more often, estimating the fair value of the underlying asset is an important point of litigation between the parties.