Pre-pack insolvency a success for five companies

The government enacted the Insolvency and Bankruptcy Code () in August 2021 and introduced the PPIRP for micro, small and medium enterprises. According to the newsletter of the (IBBI), these five cases resulted in a 25% realisation.

The concept of pre-packaged insolvency involves the and its creditors negotiating and agreeing on a before initiating the formal .

"In any functional unit, apart from formal credit, the credit line extended by operational creditors plays a crucial role. The motto of IBC is to balance the interests of all . The fact that all five cases resolved under pre-pack ensured full payment of operational ' claims is notable and reinforces the principle of fair and equitable treatment," said Hari Hara Mishra, CEO of the in India.

Once approved by the creditors, the pre-packaged resolution plan is submitted to the () for approval. It is similar to an out-of-court settlement process.

The debtor and creditor work on a draft resolution plan before formally initiating the insolvency process. Once finalised and approved by the required majority of creditors, the plan is submitted to NCLT.

The pre-packaged insolvency process is initiated voluntarily by the debtor. Since the resolution plan is negotiated and finalised before filing with NCLT, it reduces the time taken for resolution compared to the corporate insolvency resolution process, with minimal disruptions.