Pre-Packaged Insolvency Resolution Process

April 2021

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In this edition, we will be seeing about Pre-Packaged Insolvency Resolution Process. We will have our usual Legal terms and News Bites related to notifications by MCA, SEBI, RBI, IT and GST following the article.

CEO CS Saranya Deivasigamani,

CEO

Pre-Packaged Insolvency Resolution Process

The Insolvency and Bankruptcy Code (Amendment) Ordinance, 2021 promulgated on 4th April, 2021 provides for pre-packaged insolvency resolution process (PPIRP) for corporate debtors classified as micro, small and medium enterprises. The IBBI notified the Insolvency and Bankruptcy Board of India (Pre-packaged Insolvency Resolution Process) Regulations, 2021 (PPIRP Regulations) on 4th April, 2021 to enable operationalisation of PPIRP.

Eligibility

An insolvency professional shall be eligible to be appointed as an interim resolution professional or resolution professional, as the case may on submitting the consent in Form P1, if he/she, and all partners and directors of the insolvency professional entity of which he/she is a partner or director, are independent of the corporate debtor.

A resolution professional, who is a director or a partner of an insolvency professional entity, shall be ineligible to continue as a resolution professional in a process, if the insolvency professional entity or any partner or director of such insolvency professional entity represents any of the stakeholders in the same process.

Appointment of Professional

The resolution professional may appoint a professional on various activities needing specialized concern. However, the following persons shall not be appointed as a professional, namely:-

  1. a person who is not registered with the regulator of the profession concerned;
  2. a related party of the corporate debtor;
  3. an auditor of the corporate debtor at any time during the five years preceding the pre-packaged insolvency commencement date;
  4. a partner or director of the insolvency professional entity of which the resolution professional is a partner or director; or (e) a relative of the resolution professional or of a partner or director of the insolvency professional entity of which the resolution professional is a partner or director.

Initiation Process

  1. The applicant shall convene meetings of the financial creditors, who are not related parties of the corporate debtor.
  2. The notice of the meeting shall be served to the financial creditors, who are not related parties of the corporate debtor, at least five days before the date of the meeting, unless a shorter time is agreed to by all of them in Form P2.
  3. The financial creditors who are not related parties of the corporate debtor and have not less than ten per cent. of the value of the total financial debt of such creditors may propose names of insolvency professionals whose terms shall be approved in Form P3.
  4. The terms of appointment of the resolution professional shall include – (a) fee payable to the RP for performing duties (b) fee payable to the RP and expenses to be incurred for conducting the process; and (c) fee payable to the RP and expenses to be incurred in case management of the corporate debtor is vested with the RP.
  5. The approval for filing of application under sub-section (3) of section 54A shall be in Form P4.
  6. These regulations shall mutatis mutandis apply to the corporate debtor who has no financial debt or where all financial creditors are related parties, the applicant shall convene a meeting of operational creditors, who are not related parties of the corporate debtor.

If the RP shall obtain the consent of the insolvency professionals to act as the authorised representative of creditors in the class in Form P5. Select the insolvency professional, who is the choice of the highest number of creditors in the class to act as the authorised representative of the creditors of the respective class. 

Declarations

(1) The declaration under clause (f) of sub-section (2) of section 54A shall be made in Form P6.

(2) The declaration under clause (c) of sub-section (3) of section 54C shall be made in Form P7.

Report by resolution professional.

The report under clause (a) of sub-section (1) of section 54B shall be prepared in Form P8.

Information to be furnished by the applicant

For the purposes of clause (d) of sub-section (3) of section 54C, the applicant shall furnish-

(a) audited financial statements of the corporate debtor for the last two financial years;

(b) provisional financial statements for the current financial year made up to the date of declaration under clause (f) of sub-section (2) of section 54A;

(c) Form P5 submitted by the authorised representatives selected under sub-regulation (5) of regulation 15.

Public Announcement

The resolution professional shall make a public announcement within two days of the commencement of the process in Form P9.

The corporate debtor shall submit a list of claims under sub-section (1) of section 54G in Form P10 to the resolution professional. 

 

Resolution Plans

, the resolution professional shall publish brief particulars of the invitation for resolution plans in Form P11 not later than 21 days from the pre-packaged insolvency commencement date.

Where a resolution plan is approved by the committee, the resolution professional shall submit an application, along with a compliance certificate in Form P12, to the Adjudicating Authority for approval.

Where no resolution plan is approved by the committee or where the committee has approved the termination of process, the resolution professional shall file an application in Form P13 to the Adjudicating Authority for termination of process.

For the purposes of vesting of the management with resolution professional, the resolution professional shall make an application in Form P14.

Legal Terms

Amortizement 

Paying off an amount owed over time by making planned, incremental payments of principal and interest. To amortise a loan means “to kill it off”.

NewsBites

MCA Updates

SEBI Updates

RBI Updates

IT Updates

  • No Major Updates.

GST Updates

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