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Consider the following statements with reference to the Pre-packaged Insolvency Resolution Process:
1. It is an alternate and speedier resolution mechanism for micro, medium and small enterprises which are in financial distress.
2. The pre-packaged insolvency process is initiated voluntarily by the debtor.
Which of the statements given above is/are correct?
- a)1 only
- b)2 only
- c)Both 1 and 2
- d)Neither 1 nor 2
Correct answer is option 'C'. Can you explain this answer?
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Most Upvoted Answer
Consider the following statements with reference to the Pre-packaged I...
Explanation:
1. Alternate and Speedier Resolution Mechanism:
- The Pre-packaged Insolvency Resolution Process (PIRP) is indeed an alternate and speedier resolution mechanism designed for micro, medium, and small enterprises (MSMEs) facing financial distress.
- It aims to provide a quicker and more cost-effective way for these entities to restructure their debts and resolve insolvency issues.
2. Initiated Voluntarily by the Debtor:
- Unlike the traditional insolvency resolution process, the pre-packaged insolvency process is initiated voluntarily by the debtor.
- This means that the debtor takes the proactive step of approaching the insolvency resolution professional to prepare a pre-packaged plan for restructuring the debts.
Therefore, both statements are correct. The Pre-packaged Insolvency Resolution Process is indeed an alternate and speedier resolution mechanism for MSMEs in financial distress, and it is initiated voluntarily by the debtor.
1. Alternate and Speedier Resolution Mechanism:
- The Pre-packaged Insolvency Resolution Process (PIRP) is indeed an alternate and speedier resolution mechanism designed for micro, medium, and small enterprises (MSMEs) facing financial distress.
- It aims to provide a quicker and more cost-effective way for these entities to restructure their debts and resolve insolvency issues.
2. Initiated Voluntarily by the Debtor:
- Unlike the traditional insolvency resolution process, the pre-packaged insolvency process is initiated voluntarily by the debtor.
- This means that the debtor takes the proactive step of approaching the insolvency resolution professional to prepare a pre-packaged plan for restructuring the debts.
Therefore, both statements are correct. The Pre-packaged Insolvency Resolution Process is indeed an alternate and speedier resolution mechanism for MSMEs in financial distress, and it is initiated voluntarily by the debtor.
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Community Answer
Consider the following statements with reference to the Pre-packaged I...
The Pre-packaged Insolvency Resolution Process (PPIRP) has resulted in the full settlement of operational creditors' claims in five cases.
- It was introduced in April 2021 in the wake of Covid pandemic, to deal with stress of small and mid-sized companies.
- The idea was that resolution of distressed MSMEs requires different treatment due to the unique nature of their businesses.
- Pre-packaged insolvency process is an alternate and speedier resolution mechanism for micro, medium and small enterprises in financial distress.
- Process
- It involves the debtor and its creditors negotiating and agreeing on a resolution plan before initiating the formal insolvency process.
- Once approved by the creditors, the pre-packaged resolution plan is submitted to the National Company Law Tribunal (NCLT) for approval. It is similar to an out-of-court settlement process.
- The debtor and creditor work on a draft resolution plan before formally initiating the insolvency process.
- Once finalised and approved by the required majority of creditors, the plan is submitted to NCLT.
- The pre-packaged insolvency process is initiated voluntarily by the debtor.
- Significance: Since the resolution plan is negotiated and finalised before filing with NCLT, it reduces the time taken for resolution compared to the corporate insolvency resolution process, with minimal disruptions.
Hence both statements are correct.
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Consider the following statements with reference to the Pre-packaged Insolvency Resolution Process:1. It is an alternate and speedier resolution mechanism for micro, medium and small enterprises which are in financial distress.2. The pre-packaged insolvency process is initiated voluntarily by the debtor.Which of the statements given above is/are correct?a)1 onlyb)2 onlyc)Both 1 and 2d)Neither 1 nor 2Correct answer is option 'C'. Can you explain this answer?
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