Mr. X, who is a Practising Company Secretary is approached by an Association of Small Enterprises. The members of Association want to understand Pre-Packaged Insolvency Resolution Process. As an Assistant to Mr. X, you a

Sections 54A to 54P of the Insolvency & Bankruptcy Code contain provisions relating to Pre-packaged Insolvency Resolution Process. An application for initiating pre-packaged insolvency resolution process may be made in respect of a corporate debtor classified as a micro, small or medium enterprise under subsection (1) of section 7 of the Micro, Small and Medium Enterprises Development Act, 2006. The minimum amount of default for initiating pre-packaged insolvency resolution process is ₹10 lakhs. Pre-packaged insolvency resolution process shall be completed within a period of one hundred and twenty days from the pre-packaged insolvency commencement date. The resolution professional shall submit the resolution plan, as approved by the committee of creditors to the Adjudicating Authority within a period of ninety days from the pre-packaged insolvency commencement date. An application for pre-packaged insolvency resolution process may be filed by a corporate applicant. The Insolvency and Bankruptcy Board of India (Pre-packaged Insolvency Resolution Process) Regulations, 2021 contains the procedure for pre-packaged insolvency resolution process. The corporate debtor shall, within two days of the pre-packaged insolvency commencement date, submit to the resolution professional a list of claims and a preliminary information memorandum. During the pre-packaged insolvency resolution process period, the management of the affairs of the corporate debtor shall continue to vest in the Board of Directors or the partners, as the case may be, of the corporate debtor. The resolution professional shall, within seven days of the pre-packaged insolvency commencement date, constitute a committee of creditors, based on the list of claims confirmed. As per Section 54I(2), the first meeting of the committee of creditors shall be held within seven days of the constitution of the committee of creditors. The committee of creditors (CoC), at any time during the pre-packaged insolvency resolution process period, by a vote of not less than sixty-six per cent. of the voting shares, resolve to vest the management of the corporate debtor with the resolution professional. The corporate debtor shall submit the base resolution plan to the resolution professional within two days of the pre-packaged insolvency commencement date, and the resolution professional shall present it to the committee of creditors. The CoC may provide the corporate debtor an opportunity to revise the base resolution plan prior to its approval or invitation of prospective resolution applicants, as the case may be. The committee of creditors may approve the base resolution plan for submission to the Adjudicating Authority if it does not impair any claims owed by the corporate debtor to the operational creditors and conforms to the requirements of section 30(1) & (2) of the Code. Where - (a) the committee of creditors does not approve the base resolution plan under subsection (4); or (b) the base resolution plan impairs any claims owed by the corporate debtor to the operational creditors, the resolution professional shall invite prospective resolution applicants to submit a resolution plan or plans, to compete with the base resolution plan, in such manner as may be specified. The committee of creditors shall evaluate the resolution plans presented by the resolution professional and select either BRP or a resolution plan which is significantly better than BRP. The resolution plan approved by the committee of creditors is submitted to the Adjudicating Authority by the Resolution Professional. The Adjudicating Authority shall, before passing an order for approval of a resolution plan under this sub-section, satisfy itself that the resolution plan has provisions for its effective implementation. Benefits of pre-pack insolvency resolution process: It consolidates the benefit of both formal and informal proceedings of resolution, thus broadening the options for stakeholders. It enables faster resolution as the corporate debtor can prepare a settlement plan or resolution plan with the creditors before going to NCLT. Reduced burden on NCLT due to out of court settlements. With the suspension of CIRP until March 2021, pre-pack has come as a relief to promoters and corporate debtors. It allows the corporate debtor retain control till a settlement is reached with the creditors.