Micro, small, and medium enterprises (MSMEs) are critical for India’s economy. They contribute significantly to gross domestic product and provide employment to a sizeable population. The COVID-19 pandemic has impacted their business operations and exposed many of them to financial stress. Resolution of their stress requires different treatment, due to the unique nature of their businesses and simpler corporate structures. Therefore, it was considered expedient to provide an efficient alternative insolvency resolution process under the Code for corporate MSMEs, that ensures quicker, cost-effective and value maximising outcomes for all the stakeholders, in a manner that is least disruptive to the continuity of their businesses, and which preserves jobs. Accordingly, President promulgated the Insolvency and Bankruptcy Code (Amendment) Ordinance, 2021 on 4th April 2021 to introduce PPIRP under the Code for this purpose. PPIRP is built on trust and honours the honest MSME owners by enabling resolution when the company remains with them.
The pre-Packaged Insolvency Resolution Process (PPIRP) is available for the resolution of the stress of corporate MSMEs. It is available as an alternate option, should the stakeholders like to use it. It is available for resolving stress where default is at least ₹ 1 crore for which CIRP is available. Unlike CIRP, it is also available in respect of defaults where default is at least ₹ 10 lakh and defaults that arose between 25th March 2020 to 24th March 2021.
PPIRP has the features, which make a CIRP sacrosanct, and has the rigour and discipline of the CIRP. It is informal up to a point and formal thereafter. It blends debtor-in-possession with creditor-in-control. It is neither a fully private nor a fully public process - it allows the company, if eligible under section 29A, to submit the base resolution plan (BRP) which is exposed to challenge for value maximisation. It safeguards the rights of stakeholders as much as in CIRP and has adequate checks and balances to prevent any potential misuse. It entails a limited role of the courts and IPs. Unlike CIRP, it does not yield if there is no resolution plan. Though PPIRP and CIRP are alternate options, some stakeholders may one over the other in certain circumstances.
This brochure presents step-by-step activities from initiation till the closure of PPIRP. It annexes:
a typical process flow of a PPIRP (Annexure A);
an indicative list of responsibilities of the CD, the RP and the creditors in respect of a PPIRP (Annexure B);
a model timeline for completion of PPIRP within the prescribed period of 120 days from the date of its commencement (Annexure C); and
a list of Forms (Annexure D)