1. Pre Packaged Resolution Insolvency Plan (PPIRP)
1. Pre Packaged Resolution Insolvency Plan (PPIRP)
The concept of ‘Pre-Packaged Insolvency’ has not all of a sudden come into vogue. This concept, by whatever term it may be called, has found its place in the Insolvency Laws in the United Kingdom, the United States of America, Singapore, France and Canada.
In India, the outbreak of COVID-19 pandemic and the lockdown imposed thereto forced companies, industries and enterprises all over the World to remain shut for a long period of time thus pushing innumerable business units, specifically the Micro, Small and Medium Enterprises (MSMEs), into financial distress.
Considering the need of the hour of revival and insolvency resolution of these Micro, Small and Medium Enterprises that contribute significantly to India’s GDP and provide employment to a sizeable population, the Government of India upon several deliberations promulgated the regime of Pre-Packaged Insolvency specifically for such MSMEs vide The Insolvency and Bankruptcy Code (Amendment) Ordinance, 2021.
Under a pre packaged resolution Insolvency plan, the debtor and creditor agree on a restructuring or a resolution plan in advance, before the case is admitted for insolvency proceedings. Principally, the pre-pack process provides an alternative insolvency resolution process for MSME corporate debtors, which involves a ‘debtor-in-possession with creditor-in-control’ model, and envisages a shorter timelineforcompletion.
Thus, Pre-Packaged Insolvency has emerged as an innovative corporate rescue method that incorporates the virtues of both informal (out-of-court) and formal (judicial) insolvency proceedings thus resulting in a faster, cost-effective and value maximizing regime along with ensuring that the management of MSMEs remains with the honest MSME owners. This regime has been introduced as an alternative to Corporate Insolvency Resolution Process (CIRP) and not as a replacement of the same.