What is pre-packed insolvency?
Pre-packed insolvency (PPI) is a fast-track insolvency process that is designed to help companies that are in financial distress but are still viable. In a PPI, the company and its creditors agree on a restructuring plan before the company files for insolvency. This plan is then submitted to the National Company Law Tribunal (NCLT) for approval. If the plan is approved, the company is restructured and continues to operate.
What are the benefits of pre-packed insolvency?
The benefits of pre-packed insolvency include:
- It is a faster process than the traditional insolvency process.
- It can save the company from liquidation.
- It can preserve the value of the company’s assets.
- It can protect the interests of the company’s creditors.
Who can initiate pre-packed insolvency?
Pre-packed insolvency can be initiated by any of the following:
- The company itself
- A majority of the company’s creditors
- The Resolution Professional (RP)
What are the steps in pre-packed insolvency?
The steps in pre-packed insolvency are as follows:
- The company and its creditors agree on a restructuring plan.
- The plan is submitted to the NCLT for approval.
- The NCLT holds a hearing on the plan.
- If the plan is approved, the company is restructured and continues to operate.
Multiple choice questions:
- Which of the following is not a benefit of pre-packed insolvency?
- It is a faster process than the traditional insolvency process.
- It can save the company from liquidation.
- It can preserve the value of the company’s assets.
- It can protect the interests of the company’s shareholders.
The answer is It can protect the interests of the company’s shareholders. The interests of the company’s shareholders are not a priority in pre-packed insolvency. The priority is to restructure the company and save it from liquidation.
- What is the role of the Resolution Professional (RP) in pre-packed insolvency?
The RP is a professional who is appointed by the NCLT to oversee the pre-packed insolvency process. The RP’s role is to facilitate the negotiation of the restructuring plan and to submit the plan to the NCLT for approval.
- What is the order of priority for the distribution of proceeds in pre-packed insolvency?
The order of priority for the distribution of proceeds in pre-packed insolvency is the same as the order of priority for the distribution of proceeds in liquidation. This means that secured creditors are paid first, followed by priority creditors, unsecured creditors, and then shareholders.