WHY IS PREPACK INSOLVENCY A PANACEA FOR MICRO, SMALL AND MEDIUM CORPORATES.
The Scheme in brief:
• The borrower has to be a corporate body and must have committed default of a minimum Rs.10 lacs and maximum Rs.1 Cr.
• Pass a Special Resolution that the company will file an application before NCLT for initiating pre-packaged Insolvency Process.
• Convene a meeting of the Financial Creditors (FC) and inform them about the plan.
• Have name of the RP approved by the FCs holding not less than 66% of the outstanding loan amount.
• Prepare a plan as to how the company will come back on track. The company may propose to pay less to the FC and OC in the resolution plan.
• File the application for admission of the case with NCLT for initiating pre-pack insolvency. The application is admitted and Resolution Professional is appointed by NCLT.
• The RP will submit the plan before the committee of Financial Creditors. The Committee will weigh technical and financial viability of the plan and approve it. The committee may invite plans from other applicants as well. The promoter will be given preference with a request to match/beat the better plan.
• Once plan is approved by the Coc, it will be put up before NCLT by the RP.
• Once the plan is approved by NCLT it becomes binding on all the parties.
• The process has to be completed within 120 days from the date commencement of Insolvency Process.
• This is the best way to restructure the liability towards the Banks and Suppliers and revive the company with minimal cost, in shortest possible time while retaining control over the company.