PPIRP (Syllabus: GS Paper 3 – Economy)

News-CRUX-10     28th May 2024        
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Context: The Pre-packaged Insolvency Resolution Process (PPIRP) has resulted in the full settlement of operational creditors' claims in five cases.

Pre-packaged Insolvency Resolution Process (PPIRP)

  • About: PPIRP involves the negotiation of a pre-packaged plan between the debtor and its creditors before the commencement of the insolvency process.
  • Introduced in: April 2021 to address the impact of the Covid pandemic on small and mid-sized companies.
  • Aimed at providing tailored solutions for distressed MSMEs due to their unique business nature.
  • Purpose: Provides an expedited resolution mechanism for micro, medium, and small enterprises facing financial distress.
  • Process: Involves negotiation and agreement between debtor and creditors on a resolution plan before formal insolvency proceedings.

oUpon creditor approval, the pre-packaged plan is submitted to the National Company Law Tribunal (NCLT), resembling an out-of-court settlement.

oDrafting and finalization of the resolution plan precede formal initiation of the insolvency process.

oThe finalized plan, upon creditor majority approval, is presented to NCLT.

  • Implementation: It is initiated voluntarily by the debtor.
  • Legal Provision: It is a recent addition to the Insolvency and Bankruptcy Code, 2016 (IBC) and provides for a faster and more efficient mechanism for the resolution of corporate insolvency.
  • Significance: Reduces resolution time compared to the traditional corporate insolvency resolution process, with minimal disruptions.

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