• Pre-Pack insolvency for whom?

Micro, small and medium enterprises are critical for India’s economy as they contribute significantly to its gross domestic product, works at grass root level and provide employment to a sizeable population. It is expedient to provide an efficient alternative of complex CIRP for entities classified as MSME enterprises ensuring quicker, cost-effective and value maximising outcomes for all the stakeholders, in a manner which is least disruptive to the continuity of their businesses.

  • What is the criteria for an entity to be a MSME?

Industry typeInvestment in Plant & Machinery or EquipmentTurnover
Micro1 Crore5 Crore
Small10 Crores50 Crores
Medium50 Crores250 Crores

  • Minimum amount of Default to initiate PPIRP

PPIRP can be initiated only when there is default in repayment of loan of Rs. 10 Lacs or more. There is no upper limit prescribed for the default amount but off course the criteria being MSME should be satisfied to opt for PPIRP process.

  • Who can initiate PPIRP

CD being the best person to understand company, has been recommended to initiate the pre-pack with the consent of simple majority of shareholders of the CD and unrelated FCs. Wherever the CD does not have any unrelated FC, similar approval of unrelated OCs may be taken

  • Compliances to basic structure

Implementation of the simplistic PPIRP under the Code would guarantee compliance of the IBC by maintaining the basic structure, avoiding contraction of the stakeholders rights and instituting proper checks against any potential abuses

  • Liquidation by CoC

The proposed PPIRP requires 75% of voting power approval by the COC to initiate liquidation of corporate debtor.

  • Shorter Procedure

It is very short procedure as compared to CIRP, as there shall be a period of 90 days for filling of the resolution plan. In addition to it, another 30 days are allowed for approval as opposed to 180 days

For any clarifications/suggestions or any queries please write drop a comment or write to us at info@sigmalegal.in




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