Status as on- 14/04/20201
The pre-packaged Insolvency Resolution Process (referred as “PPIRP”) is an alternative to the Corporate Insolvency Resolution Process (CIRP) which had been prescribed by Insolvency and Bankruptcy Code, 2016.
In India, the 1st of its kind “Pre-packaged Insolvency Resolution Process (referred as PPIRP) for MSME sector, was introduced with The Insolvency and Bankruptcy Code (Amendment) Ordinance, 2021 (referred as PPRIP Ordinance 2021) promulgated by an extra-ordinary ordinance dated 04/04/2021 by Government of India.
A General PPIRP may have the following characteristics :
- Pre-packaged Insolvency is a quasi-formal procedure that integrates the essence of an out-of-court private restructuring and that of a formal bankruptcy.
- It would be on a consensual basis where both creditor and defaulting debtors agree to reform the business or entity
- It may have a pre-approved pre-packaged resolution plan (refer as “Base resolution plan) agreed between debtor and creditor
- It may be designed for a special sector or category of entities with an aim to reform them.
- It may be a pre-planned insolvency procedure where a resolution plan is formulated and finalized prior to the initiation of formal proceedings.
- A pre-pack is the resolution of the debt of a distressed company through an agreement between creditors and investors instead of a public bidding process.
In India, the 1st of its kind “Pre-packaged Insolvency Resolution Process (referred as PPIRP) for MSME sector, was introduced with The Insolvency and Bankruptcy Code (Amendment) Ordinance, 2021 (referred as PPRIP Ordinance 2021) promulgated by an extra-ordinary ordinance dated 04/04/2021 by Government of India.
Let’s give background for the same.
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- In June 2020, the Government constituted a sub-committee of the Insolvency Law Committee (ILC) under the chairmanship of Dr. M. S. Sahoo, Chairperson, Insolvency and Bankruptcy Board of India (IBBI) to make recommendation on the pre-pack insolvency resolution process (PPIRP).
- PPIRP Ordinance, 2021 promulgated on 4th April 2021 provides for pre-packaged insolvency resolution process (PPIRP) for corporate debtors classified as Micro, Small and Medium Enterprises. (MSME)
- It was proposed to implement the said PPIRP from immediate effect, to reform the MSME Sector
- This is the biggest reform to restructure the MSME
- It is applicable to all the corporate persons (Companies registered under the Companies Act, Limited Liability partnership and other corporate entities) which are covered under the defined of “MSME” as defined in section 7 of the Micro, Small and Medium Enterprises Development Act, 2006.
- Minimum default is Rs. 10 Lacs to opt for this IPPIRP
- IBBI issued the Insolvency and Bankruptcy Board of India (Pre-Packaged Insolvency Resolution Process) Regulations, 2021 (referred as IPPIRP Regulations, 2021) to help operationalize the pre-packaged insolvency resolution process (PPIRP) micro, small and medium enterprises (MSMEs).
Conclusion
The pre-packaged Insolvency Resolution Process (PPIRP) is like pre-packaged Food which can be opened and used. It may prove a big reform to MSME which is facing financial difficulties due to pandemic or other issues. It would cost-effective, fast and result-oriented. For more information, please connect to our expert IBC team at ibc@centrik.in
Disclaimer: –
The above article/or summary is based on the personal interpretation of the related laws and regulations. The readers is expected to take expert advice before relying on this article.
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