Silent features of Proposed Pre-packaged Insolvency Resolution Process under Insolvency and Bankruptcy Code, 2016 – Report of the Sub-Committee of the Insolvency Law Committee on Pre-packaged Insolvency Resolution Process

Silent features of Proposed Pre-packaged Insolvency Resolution Process under Insolvency and Bankruptcy Code, 2016 Report of the Sub-Committee […]

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Silent features of Proposed Pre-packaged Insolvency Resolution Process under Insolvency and Bankruptcy Code, 2016

Report of the Sub-Committee of the Insolvency Law Committee on Pre-packaged Insolvency Resolution Process

1. A Typical Pre-Pack Process Flow

 

(Source: Report of Sub-committee of ILC on Pre-packaged Insolvency Resolution Process)

2. Salient Features of Proposed Pre-pack vis-à-vis CIRP

 

Parameter CIRP Proposed Pre-pack
Objective Resolution through a resolution plan Resolution through a resolution plan
Legal framework Relatively more in the statute and less
in regulations
Relatively less in the statute and more
in regulations
Applicability Companies and LLPs Companies and LLPs
Initiation of process Default above Rs.1 crore,
excluding COVID-19 Default
Pre and post default stress, including
COVID-19 default. In a phased manner,
if required
Initiation by FC, OC, or CD CD, with consent of majority of
unrelated Fcs
Management of the CD IP-in-possession with
creditor-in-control
Debtor-in-possession with
creditor-in-control
Role of IP IRP appointed by the applicant and
then RP by the CoC
RP, to be appointed with consent of
majority of unrelated Fcs
  Managing affairs of the CD and
conducting the process
Conducting the process
Claim collation IRP to invite and collate CD to provide. RP to verify.
Information memorandum Prepared by RP Draft prepared by CD and finalised
by RP
Moratorium Moratorium under section 14 Limited Moratorium
Interim finance Yes Yes
Avoidance transactions Yes Yes
Valuation By two valuers By two valuers
IRPC Includes cost of running operations Does not include cost of running
operations
Invitation for resolution plans Public process First right of offer to promoters,
Swiss Challenge
Ineligibility for resolution plan Section 29A to applies Section 29A to apply
Early closure of process Under section 12A, on request
of the applicant
With approval of 66% of voting share,
present and voting; Suo moto by CoC
Approval of resolution
plan by CoC
66% of voting share 66% of voting share, present and voting
Consequence of
termination of process
No termination allowed Liquidation, with 75% of voting
share of CoC
Consequence of failure of
process
Liquidation Closure
Binding outcome Resolution plan binding Resolution plan binding
Regulatory benefits Yes Yes
Clean Slate, post resolution Yes Yes
Role of IP and AA Relatively more Relatively less
Timeline 180 days till approval of resolution
plan by the AA
90 days for filing of resolution plan with
the AA plus 30 days for the AA to
approve it
Cooling off 12 months between two CIRPs Three years between two Pre-packs

(Source: Report of Sub-committee of ILC on Pre-packaged Insolvency Resolution Process)

3. Invitation of comments from public on Pre-packaged Insolvency Resolution Process under Insolvency and Bankruptcy Code, 2016

Public comments are hereby invited on recommendations of Sub-committee of ILC on Pre-packaged Insolvency Resolution Process. Suggestion/comments, if any, along with brief justification may be submitted online therein at the below mentioned web link by the end of business hours on 22nd January, 2021:

https://ibbi.gov.in/webfront/prepack_comment_irp.php

4. Report of the Sub-Committee of the Insolvency Law Committee on Pre-packaged Insolvency Resolution Process

https://ibclaw.in/wp-content/uploads/2021/01/Pre-Pack-Comments.pdf
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