Pre-Packaged Insolvency Resolution Process:
The Pre-packaged Insolvency Resolution Process (PPIRP) has resulted in the full settlement of operational creditors’ claims in five cases.
- Pre-packaged Insolvency Resolution Process was introduced in April 2021 in the wake of Covid pandemic, to deal with stress of small and mid-sized companies.
- The idea was that resolution of distressed MSMEs requires different treatment due to the unique nature of their businesses.
- Pre-packaged insolvency process is an alternate and speedier resolution mechanism for micro, medium and small enterprises in financial distress.
- It involves the debtor and its creditors negotiating and agreeing on a resolution plan before initiating the formal insolvency process.
- Once approved by the creditors, the pre-packaged resolution plan is submitted to the National Company Law Tribunal (NCLT) for approval.
- It is similar to an out-of-court settlement process.
- The debtor and creditor work on a draft resolution plan before formally initiating the insolvency process.
- Once finalised and approved by the required majority of creditors, the plan is submitted to NCLT.
- The pre-packaged insolvency process is initiated voluntarily by the debtor.
- Since the resolution plan is negotiated and finalised before filing with NCLT, it reduces the time taken for resolution compared to the corporate insolvency resolution process, with minimal disruptions.
