Pre-packaged Insolvency Resolution Process (PPIRP) Application Procedure

The Insolvency and Bankruptcy Board of India (IBBI) notified the rules for the recently announced pre-packaged insolvency resolution process. Insolvency and Bankruptcy Code (Amendment) Ordinance, 2021 has been introduced to provide a pre-packaged insolvency resolution process (PPIRP) for MSMEs. In line with this notification, IBBI now introduced the “Insolvency and Bankruptcy (prepackaged insolvency resolution process) Rules, 2021” to enable the operationalisation of PPIRP. This new rule provides the Procedure for Filing of Application for PPIRP and the current article provides the details on the same.

Insolvency and Bankruptcy (prepackaged insolvency resolution process) Rules, 2021

As per the new rules the corporate applicant, need to file an application for initiating pre-packaged insolvency resolution process under subsection (1) of section 54C of the Insolvency and Bankruptcy Code, in Form 1, accompanied with an affidavit, documents, in electronic form, along with a fee of rupees fifteen thousand:

Pre-packaged Insolvency Resolution Process (PPIRP) Regulation

A pre-packaged insolvency process is an informal plan worked out by the creditor and debtor for debt resolution. The PPIRP Regulations detail the Forms that stakeholders are required to use, and the manner of carrying out various tasks by them as part of the PPIRP. These provide details and manner relating to the following.

Eligibility to act as resolution professional, and his terms of appointment
Eligibility of registered valuers and other professionals
Identification and selection of authorised representative
Public announcement and claims of stakeholders
Information memorandum
Meetings of the creditors and committee of creditors
Invitation for resolution plans
Competition between the base resolution plan and the best resolution plan
Evaluation and consideration of resolution plans
Vesting management of corporate debtor with resolution professional;
Termination of PPIRP.

Note: The PPIRP Regulations has come into force from 9th April 2021

Fee for Filing of Application for Prepackaged Insolvency Resolution Process

A corporate applicant needs to furnish a fee of rupees fifteen thousand (Rs.150000) to apply to initiate the Pre-packaged Insolvency Resolution Process.

Documents Required for Filing of Application for PPIRP

The documents required for filing an application for PPIRP is as follows:

In case of financial debt, a record of default obtained through the information utility or all documents to prove the existence of financial/operational debt and the amount in default
In case of operational debt: Copy of invoice/demand notice served by an operational creditor on the corporate debtor and Record of default obtained through the information utility
Approval of creditors under section 54A(2)(e) of the Insolvency and Bankruptcy Code, 2016 for appointment of the proposed resolution professional
Written consent by the proposed resolution professional
Declaration of the majority of the directors or partners of the corporate debtor
Copy of the special resolution or resolution of the members or partners of the corporate debtor
Approval of creditors under section 54A(3)? of the Insolvency and Bankruptcy Code, 2016 for filing application for initiating prepackaged insolvency resolution process
Report of the insolvency professional proposed to be appointed as the resolution professional as referred to in section 54B (1)(a) of the Insolvency and Bankruptcy Code, 2016
Declaration regarding the existence of any transactions of the corporate debtor, as referred to in section 54C(3)(c) of the Insolvency and Bankruptcy Code
Affidavit stating that the corporate debtor is eligible under section 29A of the Code to submit a resolution plan in the pre-packaged insolvency resolution process of the corporate debtor
Copy of the relevant books of accounts of the corporate debtor evidencing the default to the creditor
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 made up to a date not earlier than fourteen days from the date of the application.
A copy of the relevant extract of any constitutional document or shareholders' agreement that records the authority of the corporate applicant to make this application, where the corporate applicant is a member or partner of the corporate debtor
A copy of the relevant extract of an employment agreement, constitutional document or fillings made to the Registrar of Companies confirming the authority of the corporate applicant to make this application, where the corporate applicant is an individual in charge of managing the operations and resources of the corporate debtor or has control and supervision over the financial affairs of the corporate debt
Proof that the specified application fee has been paid
Proof that a copy of the application has been served to the Board
A statement of affairs made up to a date not earlier than fourteen days from the date of application including the following document:
- A list of the corporate debtor's assets and liabilities, divided into such categories as are appropriate for easy identification, with estimated values assigned to each category;
- If any property on which a claim against the corporate debtor is wholly or partly secured, particulars of the claim and its amount, and of how and when the security was created
- The names and addresses of the financial creditors and operational creditors of the corporate debtor, with the amounts due to each of them
- Particulars of any debts owed by or to the corporate debtor to or by persons connected with it
- Guarantees have been given about the debts of the corporate debtor by other persons, specifying which, if any, of the guarantors is a related party to the corporate debtor and the corporate applicant;
- The names and addresses of the members or partners of the corporate debtor with details of their respective shareholdings

The prescribed format of the forms are as follows: [pdf-embedder url="https://www.indiafilings.com/learn/wp-content/uploads/2021/04/2021-04-10-182311-5ngd9-0dd40b82af7a770d5e89c0d9e37bdb45-60-82-1.pdf" title="2021-04-10-182311-5ngd9-0dd40b82af7a770d5e89c0d9e37bdb45-60-82 (1)"]

Procedure for Filing of Application for PPIRP

A corporate applicant has to submit an online application for initiating a pre-packaged insolvency resolution process under subsection (1) of section 54C of the Insolvency and Bankruptcy Code, 2016 Code in a prescribed format. [pdf-embedder url="https://www.indiafilings.com/learn/wp-content/uploads/2021/04/InsolvencyandBankruptcyRules_12042021-7-12.pdf"] The application should be accompanied by an affidavit, documents or records along with a fee of rupees fifteen thousand. The applicant needs to provide the following details in the application form.

Particulars of the Corporate Applicant and Corporate Debtor
Particulars of Proposed Resolution Professional
Particulars of Financial/Operational Debt
Particulars of Financial Creditors, Not Being Related Parties of the Corporate Debtor

If the electronic facility is not available for filing such application, the application and the accompanying documents may be filed in physical form, and wherever the accompanying documents are bulky, the same may be submitted in scanned portable document format in a data storage device such as a compact disc or a USB flash drive acceptable to the Adjudicating Authority.

The corporate applicant needs to send a copy of the application to the Board by registered post or speed post or by hand or by electronic means, before filing it with the Adjudicating Authority.
The application shall be filed before the Adjudicating Authority by rules 20, 21, 22, 23, 24 and 26 of the National Company Law Tribunal Rules, 2016
A corporate applicant shall inform the Adjudicating Authority about the filing of any winding up petition against the corporate debtor after becoming aware of such filing.

Click here to know more about the official notification pertaining to the Insolvency and Bankruptcy (prepackaged insolvency resolution process) Rules, 2021

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