All about Pre-Packaged Insolvency Resolution Process
The Pre-Packaged Insolvency Resolution Process is a fast-track insolvency resolution mechanism under the IBC where the corporate debtor and creditors jointly agree on a resolution plan while the management continues to operate the business.
Pre-Packaged Insolvency Resolution Process introduced To address financial stress in Ministry of Micro, Small and Medium Enterprise’s, provide quick and cost-efficient resolution and Enable value maximization and liquidity support
Initiating PPIRP can be done in case a company or limited liability partnership classified as a ministry of micro, small, and medium enterprises can initiate PPIRP. Pre-Packaged Insolvency Resolution Process minimum default required is minimum default: INR 10 lakh (can be increased up to INR 1 crore).
Pre-Packaged Insolvency Resolution Process eligibility conditions: The corporate debtor must Not have undergone PPIRP in the last 3 years, not be under CIRP, Not be under a liquidation process, and corporate debtor Be eligible for u/s 29A.
How is the pre-packaged insolvency resolution process different from CIRP ?
- Pre-Packaged Insolvency Resolution Process:
- Debtor-in-possession model
- Faster and cost-effective
- Promoter continues business
- Corporate Insolvency Resolution Process:
- Creditor-in-control
- Management suspended
- Pre-packaged insolvency resolution process ensures business continuity, especially for MSMEs.
The Pre-Packaged Insolvency Resolution Process qualifies as an MSME : Based on investment and turnover:
| Category | Investment Limit | Turnover Limit |
| Micro | ≤ INR 1 Cr | ≤ INR 5 Cr |
| Small | ≤ INR 10 Cr | ≤ INR 50 Cr |
| Medium | ≤ INR 50 Cr | ≤ INR 250 Cr |
- PPIRP can be terminated in case the Pre-Packaged Insolvency Resolution Process may terminate when CoC votes for termination, no plan is submitted within 90 days, and the National Company Law Tribunal rejects the plan.
- Basic Actions are required before filing Pre-packaged insolvency resolution processes like special resolution by shareholders/partners, Preparation of a base resolution plan, Declaration by directors, Approval of ≥ 66% unrelated financial creditors and Appointment of a resolution professional
- Under the Pre-Packaged Insolvency Resolution Process after filing the application. NCLT admits/rejects within 14 days, a moratorium is declared, RP is appointed and Public announcement issued
- Timeline for Pre-packaged Insolvency Resolution Process : Total: 120 days , 90 days: in case CoC approval and 30 days in case National Company Law Tribunal approval
The Pre-Packaged Insolvency Resolution Process is a hybrid, debtor-friendly insolvency framework designed specifically for MSMEs, balancing creditor protection with business continuity and ensuring time-bound and efficient resolution.
Key Advantages of the pre-packaged insolvency resolution process under IBC 2016 law are faster resolution, Lower cost, Business continuity, minimal disruption, and Promoter-driven restructuring
- The Base Resolution Plan is a resolution plan prepared by the Corporate Debtor and submitted first to the Committee of Creditors.
- Pre-Packaged Insolvency Resolution Process: The role of the insolvency professional is to act as an advisor before filing and act as the resolution professional after admission.
- Pre-packaged insolvency resolution processes can be converted into corporate insolvency resolution processes. The answer is yes; CoC (66% vote) can convert PPIRP into a corporate insolvency resolution process. In case no plan is approved, then there is no automatic liquidation, and liquidation happens only in specific situations under the code.
- Who controls the company during the pre-packaged insolvency resolution process: Management remains with existing promoters; RP monitors functions and CoC approval required for key decisions
- Role of CoC in the pre-packaged insolvency resolution process is approves resolution plan (≥66% voting) and monitoring key decisions and the pre-packaged insolvency resolution process Can restrict expenditures.
- Under Pre-Packaged Insolvency Resolution Process, management can be taken away from promoters if 66% of the CoC vote and National Company Law Tribunal is satisfied of Fraud, or Gross mismanagement
- Pre-Packaged Insolvency Resolution Process in case the base resolution plan is rejected then RP invites other resolution applicants. Plans are evaluated competitively, and the best plan or improved plan is selected.
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