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
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