Context:
The Pre-packaged Insolvency Resolution Process (PPIRP) has resulted in the full settlement of operational creditors’ claims in five cases.
Relevance:
GS III: Indian Economy
About Pre-packaged Insolvency Resolution Process:
Introduction:
- Launched in April 2021 in response to the Covid pandemic to alleviate stress on small and mid-sized companies.
- Aimed at addressing the unique needs of distressed MSMEs.
Purpose:
- Offers an alternative and faster resolution mechanism for micro, medium, and small enterprises in financial distress.
Process:
- Negotiation: The debtor and creditors negotiate and agree on a resolution plan before formally starting the insolvency process.
- Approval: The agreed resolution plan is submitted to the National Company Law Tribunal (NCLT) for approval, resembling an out-of-court settlement.
- Drafting: Debtor and creditors draft a resolution plan before formal initiation.
- Final Submission: The finalised plan, once approved by the required majority of creditors, is submitted to NCLT.
Initiation:
- The pre-packaged insolvency process is voluntarily initiated by the debtor.
Significance:
- The pre-negotiated and finalised resolution plan before NCLT filing significantly reduces resolution time compared to the corporate insolvency resolution process, minimizing disruptions.
-Source: The Economic Times
