INTRODUCTION OF CHAPTER III-A TO THE IBC
A separate Chapter – Chapter III-A – has been inserted in the IBC in order to deal with PIRP.
ELIGIBILITY OF CORPORATE DEBTORS FOR PIRP- SECTION 54A
The Corporate Debtor (“CD”) should be an MSME under the MSMED Act.
The PIRP can be initiated only against those CDs who have neither completed Corporate Insolvency Resolution Process (“CIRP”) nor undergone PIRP or against whom no process regarding liquidation is pending neither any order for Liquidation has been passed.
The CD is eligible to submit a Resolution Plan under Section 29A of the IBC. More than 66% of the Financial Creditors (“FCs”) of the CD, who are not related parties, have supported the name proposed for the appointment of Insolvency Professional as the Resolution Professional (“RP”).
Where majority of the Directors or Partners of the CD declare that the CD will file an Application for PIRP within 90 days and the said PIRP is not being initiated in order to defraud any person.
A Special Resolution has been passed with the majority of at least 3/4th of the total number of Directors or Partners of the CD for filing Application for initiation of such PIRP.
The CD shall have an approval for filing of Application to initiate PIRP from not less than 66% of the FCs of the CD after providing the FCs with the declaration of filing Application within 90 days, the BRP and other information and documents as specified.
DUTIES OF RP BEFORE INITIATION OF PIRP- SECTION 54B
A. The RP will have to prepare a report confirming that the CD meets the eligibility criteria as under Section 54A and that the Base Resolution Plan (“BRP”) submitted is in accordance with Section 54A and file such report and any other documents with the Insolvency and Bankruptcy Board of India (IBBI/the Board).
The duties of the RP will cease in case the Corporate Debtor (“CD”) fails to file an Application to initiate PIRP within 90 days or in case when the Application to initiate PIRP is either admitted or rejected by the Adjudicating Authority (“AA”).
In the part III, we shall de dealing about an application to initiate PIRP, Time limit for completion of PIRP, Duties and power of RP during PIRP.
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