CS Nisha Sharma
Brief on Pre pack Insolvency Process
1. Before the initiation of PPIRP, the Corporate Debtor has to present the base resolution plan to the financial creditors. It could come from promoters if they are eligible under section 29A of the IBC.
2. The CD being the resolution applicant, may submit the base resolution plan either individually or jointly with any other person.
3. After the commencement of PPIRP, the Resolution Professional has to submit the resolution plan approved by the Committee of Creditors to the Adjudicating Authority within 90 days.
4. During the PPIRP, the existing management handles the affairs of the Corporate Debtor.
5. 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.
6. The committee of creditors 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.
7. The CoC 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. (Claims shall be considered to be impaired where the resolution plan does not provide for the full payment of the confirmed claims as per the updated list of claims maintained by the resolution professional.) (Simply Operational creditors claims will not be affected due to the CIRP unless operational creditors contended and filed an IA for the same with the Hon’ble NCLT.)
8. If 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
9. Time-limit: Within 120 days from the PRI comm. Date
Approved Resolution plan to AA: within 90 days from the PR comm. Date
Where no resolution plan is approved by COC within 90 days, RP shall after expiry of such time, file an application to with the AA for termination of PRI.
10. Approval of Resolution plan: vote of not less than 66% by COC
11. While considering the feasibility and viability of a resolution plan, where the resolution plan submitted by the corporate debtor provides for impairment of any claims owed by the corporate debtor, the committee of creditors may require the promoters of the corporate debtor to dilute their shareholding or voting or control rights in the corporate debtor: Provided that where the resolution plan does not provide for such dilution, the committee of creditors shall, prior to the approval of such resolution plan under sub-section (4) or sub-section (12), as the case may be, record reasons for its approval.
12. Anytime during the process, the COC can decide to terminate the process by vote of 66 % by making IA to the AA.
INSOLVENCY AND BANKRUPTCY BOARD OF INDIA (PRE-PACKAGED INSOLVENCY
RESOLUTION PROCESS) REGULATIONS, 2021
Reg. 44: Resolution Plan
A resolution plan shall provide the details for:
(a) transfer of all or part of the assets of the corporate debtor to one or more persons;
(b) sale of all or part of the assets whether subject to any security interest or not;
(c) restructuring of the corporate debtor, by way of merger, amalgamation and demerger;
(d) the substantial acquisition of shares of the corporate debtor;
(e) cancellation or delisting of any shares of the corporate debtor, if applicable;
(f) satisfaction or modification of any security interest;
(g) curing or waiving of any breach of the terms of any debt due from the corporate debtor;
(h) reduction in the amount payable to the creditors;
(i) extension of a maturity date or a change in interest rate or other terms of a debt due from the corporate debtor;
(j) amendment of the constitutional documents of the corporate debtor;
(k) issuance of securities of the corporate debtor, for cash, property, securities, or in exchange for claims or interests,
or other appropriate purpose;
(l) change in portfolio of goods or services produced or rendered by the corporate debtor;
(m) change in technology used by the corporate debtor; and
(n) obtaining necessary approvals from the Central and State Governments and other authorities.
Reg 45: Mandatory contents of resolution plan.
(1) A resolution plan shall include-
(a) an affidavit that resolution applicant is eligible to submit a resolution plan for resolution of the corporate debtor under the Code;
(b) a statement giving details if the resolution applicant or any of its related parties has failed to implement or contributed to the failure of implementation of any resolution plan approved by the Adjudicating Authority at any time in the past; and
(c) an undertaking that every information and records provided in connection with or in the resolution plan is true and correct and discovery of false information and record at any time will render the resolution applicant ineligible to participate in any resolution process under the Code.
(2) A resolution plan shall provide for-
(a) the term of the plan and its implementation schedule;
(b) the management and control of the business of the corporate debtor during its term; and
(c) adequate means for supervising its implementation.
(3) A resolution plan shall demonstrate that –
(a) it addresses the cause of default;
(b) it is feasible and viable;
(c) it has provisions for its effective implementation;
(d) it has provisions for approvals required and the timeline for the same; and
(e) the resolution applicant has the capability to implement the resolution plan.
(4) A resolution plan shall include a statement as to how it has dealt with the interests of all stakeholders, including financial creditors and operational creditors, of the corporate debtor.
(5) The amount payable under a resolution plan –
(a) to the operational creditors shall be paid in priority over financial creditors; and
(b) to the financial creditors, who have a right to vote under sub-section (2) of section 21 and did not vote in favour of the resolution plan, shall be paid in priority over financial creditors who voted in favour of the plan.
Reg 46. Submission of resolution plans.
(1) A resolution applicant may submit resolution plan or plans prepared in accordance with the Code and these Regulations to the resolution professional through electronic means within the time given in the invitation for resolution plan.
(2) A resolution plan which does not comply with the provisions of sub-regulation (1) shall be rejected