MSME- Pre-Packaged Insolvency Resolution Process

The Ordinance has introduced a Pre-Packaged Insolvency Resolution Process (‘PIRP’) for corporate persons who have been classified as Micro, Small and Medium Enterprises("MSME") under the Micro, Small and Medium Enterprises Development Act, 2006 ("MSMED Act"). A Pre-Packaged Scheme is an arrangement under which a Stressed Company and the Purchaser negotiate the sale of all or part of a company’s business or assets prior to the appointment of an Insolvency Professional as an Administrator. The main objective of bringing in this concept is to aid the Insolvency framework, avoid spending time and money in Court proceedings & legal battles and directly move to getting a fair resolution for the company, which was the very objective of the Insolvency and Bankruptcy Code, 2016 ("IBC") in the first place. Pre-Packaged Schemes are already prevalent in the UK and the USA and the idea behind it is to approach the Court with the already-negotiated Restructuring Plan for the company. This is being implemented in India with the motive that with a timely resolution of Stressed Companies, their actual market value can be capitalised upon without any depreciation or deterioration. We have dealt this scheme in a detailed manner in this whitepaper.