FAQs on Pre-Packaged Insolvency Resolution Process (PIRP)

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FAQs on Pre-Packaged Insolvency Resolution Process (PIRP)

 

 

Author

CA. Neeraja Kartik

 

 

CA IP NeerajaKartik is a Chartered Accountant andInsolvency Professional with over 18 Years ofExperience. She has been employed with one of thebiggest Audit and accounting firms in India, PWC andBiggest Financial Service Providers, Citigroup. As aDirector of Nakshtra Insolvency ResolutionProfessionals Limited , She has been into StressedAsset Resolution for past 4 years, and handling assignments for her firm, where the aggregate Debt is more than 4000 Cr. She can be reachedat neereaja.peri@gmail.com ,

Q1. Who is it Applicable to ?

        A1. Companies and LLPs which are Micro ,Small or Medium scale Enterprises as per Section 7 (1) of MSME Act 2006.

Q2.What is the Minimum and Maximum amount of Default for filing an application for initiatingPIRP  ?

A2. Minimum Amount of default id Rs .10 Lacs and No maximum amount is specified.

Q3. Can the default be of Operational Debt ?

A3. Yes the Default can be Operational Debt  or Financial Debt

Q4. Which is the Relevent Section of Law  to file Application for Initiating PIRP.

      A4. 54 (C) of IBC,2016

Q.5Where is the Application Filed?

A5. Bench of NCLT, where the Registered office of CD is located.

Q6 Can the Application be filed online?

A6.Currently the Applications have to be filed in Physical Form .If too voluminous the same can be submitted in Pen Drive or like.

Q7. Who Can Make an Application for Initiating PIRP.

A7. A Company or LLP referred to as Corporate Debtor (CD) who fulfills the following Criteria Can make an Application:

  1. It has not undergone pre-packaged insolvency resolution process or completed corporate insolvency resolution process (CIRP), during the period of 3 years preceding the initiation date.
  2. It is not undergoing a corporate insolvency resolution process (CIRP).
  3. no order requiring it to be liquidated is passed under section 33 of IBC,2016.
  4. It is eligible to submit a resolution plan under section 29A of IBC, 2016.

Q8. How is Application for PIRP disposed( i.e, order of disposal of PIRP and CIRP applications)

A8  (a) Where an application filed under section 54C  (PIRP ) is pending, the Adjudicating Authority shall pass an order to admit or reject such application, before considering any application filed under section 7 or section 9 or section 10

        (b) Where an application under section 54C is filed within fourteen days of filing of any application under section 7 or section 9 or section 10, which is pending, in respect of the same corporate debtor, then the Adjudicating Authority (AA)  shall first dispose of the application under section 54C

 (c )Where an application under section 54C is filed after fourteen days of the filing of any application under section 7 or section 9 or section 10, in respect of the same corporate debtor, the Adjudicating Authority shall first dispose of the application under sections 7, 9 or 10.

Q9. What is the Procedure to be fulfilled by Corporate Debtor internally before filing the application for initiating PIRP.

A9. The majority of the directors or partners of the corporate debtor, have made a declaration

  1. That the CD shall file an application for initiating pre-packaged insolvency resolution process within 90 days
  2. that the pre-packaged insolvency resolution process is not being initiated to defraud any person
  3. The name of the insolvency professional proposed and approved by Financial Creditors
  4. The members of the CD have passed a special resolution, or at least three-fourth of the total number of partners have approved the filing of an application for Initiating PIRP.

Q10. What is the Pre-requisite percentage of approval from Financial Creditors for Filing the Application in

A10.Financial Creditors of the corporate debtor, not being its related parties, representing not less than sixty-six per cent  in value of the financial debt due to such creditors, have approved such proposal.

Q11. Duties of resolution professional before initiation of pre-packaged insolvency resolution process.

A11. Following are the duties of RP:

  1. prepare a report in such form as may be specified, confirming whether the corporate debtor meets the requirements as mentioned above
  2. The base resolution plan conforms to the requirements of IBC

Q12. Which is the Relevant form for Filing :

A8 .Form No. 1 [sub-rule (1) of rule 4] Insolvency and Bankruptcy (prepackaged insolvency resolution process) Rules, 2021.

Q13. What are the Documents to be filed along with Application

  1. In case of financial debt, record of default obtained through the information utility or all documents listed
  2. In case of operational debt, (i) copy of invoice / demand notice served by an operational creditor on the corporate debtor
  3. The declaration/ special resolution or resolution, and the approval of financial creditors in Form P3 for appointment of RP.
  4. the name and written consent, in Form P1, of the insolvency professional proposed to be appointed as resolution professional and his report mentioned in Q7 above
  5. Declaration of the majority of the directors or partners of the corporate debtor in Form P6
  6. Copy of the special resolution or resolution of the members or partners of the corporate debtor
  7. Approval of creditors for filing application for initiating pre-packaged insolvency resolution process, as set out in Form P4
  8. Report of RP as mentioned in Q7 in Form P8
  9. a declaration regarding the existence of any transactions of the corporate debtor that may be within the scope of provisions in respect of avoidance of transactions in Form P 7;
  10. Affidavit stating that the corporate debtor is eligible under section 29A of the Code
  11. Copy of the relevant books of accounts of the corporate debtor evidencing the default to creditors.
  12. Copies of audited financial statements of the corporate debtor for the last two financial years and the provisional financial statements for the current financial year.
  13. A statement of affairs made up to a date not earlier than fourteen days from the date of application

 

Q14. What is the date Commencement of PIRP

A10. The pre-packaged insolvency resolution process shall commence from the date of admission of the application by the Adjudicating Authority i.e, NCLT

Q15. What is the Time-limit for completion of pre-packaged insolvency resolution process?

A11. PIRP shall be completed within a period of 120 Days from the pre-packaged insolvency commencement date.

Q16. Is Moratorium declared in PIRP ?

A12. During the period of PIRP a Moratorium shall be declared by AA staying any other legal proceedings and execution of order by other Courts and Authorities.

Q17. Is a Public Announcement of PIRP Made ?

A13 Yes, in the manner specified by the Board

Q18..Who Submits the List of Claims?

A14 .List of Claims is Provided by the CD and Confirmed by the RP and also informs the Creditors of amount of Claim as provided by CD , upon admission of PIRP.

Q19.  Who manages the affairs of CD during the PIRP period

A15.The management of the affairs of the corporate debtor shall continue to vest in the Board of Directors or the partners, as the case may be, of the corporate debtor, subject to such conditions as may be specified, the  Resolution Professional keeps the checks and Controls in Place and Monitors the affairs of the CD

Q20. When is the CoCformed ?

A16. CoC is formed and First CoC meeting is held within 7 days of commencement of PIRP and is subject to updation on futher receipts of Claims

Q21.  Can the Management of corporate debtor Vest with Resolution Professional ?

A17. Yes , at any time during PIRP with Not less than 66  percent Voting by CoC for specified Reasons.

Q22. What is the Time-limit for Submission of Resolution Plan approved by CoC to Adjudicating Authority ?

A 18. The corporate debtor shall submit the base resolution plan RP within two days of the pre-packaged insolvency commencement date, and the RP shall present it to the committee of creditors .Resolution Plan approved by CoC shall be submitted 90 Days from the pre-packaged insolvency commencement date.

Q23. Can the CoC invite more Resolution Plans ?

A 19. the committee of creditors does not approve the base resolution plan; or the base resolution plan impairs any claims owed by the corporate debtor to the operational creditors, the resolution professional shall invite prospective resolution applicants to submit a resolution plan or plans.

Q24.  What Happens if CoC does not approve any Resolution Plan ?

A20. PIRP shall be terminated on an application of RP.

Q25.  Can CoC initiate CIRP during PIRP

A21. The committee of creditors, at any time after the pre-packaged insolvency commencement date but before the approval of resolution plan, by a vote of sixty-six per cent. of the voting shares, may resolve to initiate a  CIRP in respect of the corporate debtor, if such corporate debtor is eligible for CIRP

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