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IBC Ordinance 2021

The Indian Variant of
Prepacks

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 Let's understand
the Ordinance!

1 Definitions Introduced 6 Vesting of Management of CD

2 Eligibility & Conditions for Initiation of PPIRP 7 Approval of Resolution Plan

3 Before Initiation of PPIRP 8 Termination of PPIRP

4 Application for Initiation of PPIRP 9 Liquidation of CD

5 Role of Resolution Professional 10 Migration into CIRP

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Definitions Introduced

Preliminary Information Memorandum Pre-packaged Insolvency Commencement Date

Memorandum submitted by the corporate debtor Date of admission of an application for initiating PPIRP by
the Adjudicating Authority

PPIRP Costs PPIRP Period

(a) Interim finance and the costs incurred thereof;
(b) RP Fees and expenses incurred by RP for conducting the
PPIRP during the PPIRP Period;
(c) Costs incurred by the RP in running the business of the
corporate debtor as a going concern - where management is
vested with RP;
(d) Any costs incurred at the expense of the Government to
facilitate the PPIRP; and
(e) Any other costs as may be specified (by IBBI);
Period beginning from the pre-packaged insolvency
commencement date and ending on the date on which an
order for approval of resolution plan or termination of PPIRP
or initiation of CIRP, is passed by the Adjudicating Authority
Base Resolution Plan
A resolution plan provided by the corporate debtor

Fee payable to the IP proposed

to be appointed as RP to
perform duties before initiation
of PPIRP shall form part of
PPIRP Costs

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Eligibility & Conditions for Initiation of PPIRP

CD shall be classified as a micro, small or medium - FCs to propose name of RP (IBBI to specify voting
MSME RP number)
enterprise u/s 7(1) of MSME Development Act, 2006
- FCs with 66% voting share to approve such proposal

- CD has not undergone CIRP or PPIRP for 3 years Majority of Directors / Partners to declare:
CIRP preceding initiation date Declare - That, PPIRP shall be initiated within 90 days
- CD is not undergoing CIRP - That, initiation is not to defraud any person
- Name of the RP as proposed and approved by FC

- Special Resolution ("S/R") of Members of the CD; or

Sec. 33 No order is passed u/s 33 of IBC liquidating the CD S/R - 3/4th of total number of partners
shall approve initiation if PPIRP

- FC with 66% voting share to approve initiation of

Sec. 29A Eligible to submit resolution plan u/s 29A of IBC FC PPIRP
- Prior to approval, FC shall be provided with
declaration, S/R and Base Resolution Plan

Note: CD must commit a minimum amount of default of higher value (not exceeding
INR 1 Cr.) to be notified by the MCA
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Before Initiation of PPIRP

General CD shall convene General Meeting to obtain the

Meeting special resolution of shareholders for initiation of Duties of the RP shall cease:
PPIRP
- If the CD fails to file PPIRP
application within 90 days of
declaration
Base CD shall prepare Base Resolution Plan which shall be provided
- If the PPIRP Application is
Plan to the FCs before they vote on approval for initiation of PPIRP admitted or rejected

CD shall require the consent of FC

Consent
- to propose and approve the name of the RP
of FC
- to approve the initiation of PPIRP

- Commences from the date of approval of name of the RP by the FCs

Duties of - RP shall prepare Report on whether:
RP CD meets the eligibility and conditions for initiation and
Base Resolution Plan confirms to the requirements of S.30 (1) and (2)

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Application for Initiation of PPIRP

Reject, if
1 MCA to prescribe the format & content of the Application Adjudicating application is
Authority incomplete
(after giving 7 days
shall notice to rectify
To be filed by the Corporate Applicant - where the CD meets defect)
2
the eligibility and conditions for initiation of PPIRP

3 Documents to be filed along with Application:

Declaration Admit, if Along with admission:
Special Resolution application is - Declare Moratorium*
complete - Appoint RP
FC Approval for initiation - Cause Public
Announcement to be
Written Consent of proposed RP
made by RP
Report of RP on eligibility of CD and Base Resolution Plan
PPIRP shall
Declaration by CD reg. existence of Avoidance transactions commence from
date of admission
Information relating to books of account of CD
(*) S. 14 (2) & (2A) do not operate during PPIRP (unless
Adjudicating Authority orders vesting of management of
CD with RP)

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Application for Initiation of PPIRP

S.7, 9 or 10 Application is
Is the PPIRP Application
pending and whether
pending before
PPIRP Application is filed
Adjudicating Authority
within 14 days of filing of
(before a S.7, 9 or 10
such S. 7, 9 or 10
Application is filed)?
Application?

Adjudicating
Authority shall first
Adjudicating
dispose the S.7, 9 or
Authority shall first
10 Application
dispose the PPIRP
Application

Note: - The above shall not apply, if S. 7, 9 or 10 Application is pending as on the date of commencement of the Ordinance
- Where CD is undergoing PPIRP, the FC or OC of such CD cannot initiate CIRP
- No fresh CIRP Application can be filed till 12 months after the resolution plan is approved in PPIRP

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Role of Resolution Professional

To conduct the pre-packaged insolvency Prepare Information Memorandum on the basis of

resolution process Preliminary IM submitted by CD

- Confirm the list of claims submitted by CD File application for avoidance of transactions under
- Inform the Creditors regarding their claims Chapter III or fraudulent or wrongful trading under
- Maintain updated list of claims Chapter VI

Monitor the management of affairs of the Corporate Present the resolution plans (which confirm to
Debtor S.30(2)) to the CoC for its evaluation

- Constitute CoC File application(s) with Adjudicating Authority for:

- Convene & attend all the CoC Meetings - Approval of Resolution Plan; or
- Inform CoC in the event of breach of any of the - Termination of PPIRP; or
obligations of the Directors or Partners of the CD - Initiation of CIRP

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Vesting of Management of CD D is
f C
m e nt o righ ts,
an age a ll t he
em R P, RP
Onc th t he w h ic h
ed w i ut ie s ot her
d d
vest rs and
C IR P an
hall
we g s
po s d urin a to rium
xe rcise of m or
y!
e ns p la
isio nto
CoC resolved with 66% voting prov com
e i
share to vest management of
CD with RP?

Default Rule Adjudicating Authority shall

Default Rule
prevails pass an order vesting the
Management of the affairs of management with the
the Corporate Debtor shall Resolution Professional
continue to vest with Board
of Directors or Partners

RP to file Adjudicating Authority is of

application with the opinion that the affairs
Adjudicating of the CD during PPIRP:
Authority - have been conducted in
fraudulent manner
- grossly mismanaged

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Approval of Resolution Plan
2 7 14 Within 90 Within 120
PPIRP days days days days days
Commencement Date
(date of admission of PPIRP)

CD to submit the following First Meeting - Approval of Plan by CoC

to the RP: of CoC - Submission of approved
- Details of Claims plan to the Adjudicating
- Preliminary IM Authority
- Base Resolution Plan (refer next slide)
(refer note)

Constitution of CoC Approval / Rejection

(based on the list of claims of Plan by
confirmed by the RP)
Adjudicating
Authority

Note: - All the above dates to be computed from the PPIRP Commencement Date
- Ordinance does not provide for any opportunity to extend the PPIRP period beyond 90 days
- Any person who sustained any loss or damage as a consequence of information provided or omitted in the list of claims or
preliminary IM shall be entitled to move a court having jurisdiction for seeking compensation for such loss or damage from the
promoter of director or partner at the time of such submission or from the person who has authorised such submission.

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Approval of Resolution Plan

CD shall submit the Base Does BRP provide for full

RP to present the
Resolution Plan ("BRP") to RP payment of confirmed claims CoC may approve the BRP
BRP to the CoC
(within 2 days of commencement of PPIRP) of Operational Creditors?

If CoC does not

approve the Base
Resolution Plan

CoC to evaluate the

Is X significantly better
plans (other than BRP) RP shall invite resolution
than BRP?
(based on criteria laid down by CoC presented by RP and plan(s) from prospective
s.t. conditions specified by IBBI) select the best resolution applicants RP to submit approved
resolution plan ("PRA") to compete with plan to Adjudicating
(assume "X") BRP Authority which may, by
order, either:
X to compete with - Approve the Plan
Either X (or) BRP
BRP in the manner CoC may approve the - Reject the Plan and
shall be selected for
specified by IBBI selected plan terminate PPIRP
approval

If not approved, RP to file

X may be
application with Adjudicating
selected for
Authority for termination
approval by
CoC CoC may approve X

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Approval of Resolution Plan

RP
RP shall provide Evaluation
CoC may provide CD may submit the B
jointly
Matrix & IM to prospective
opportunity to the CD to either individually or
and
resolution applicants who
revise the BRP prior to its with any other person
meet the eligibility criteria
approval or invitation of such BRP shall meet
approved by CoC
prospective resolution requirements of
applicants S.30 (1) & (2)

Where BRP does not provide for full payment

to OCs, the CoC may require the promoters
of the CD to dilute their shareholding or
voting or control rights in the CD. If the CoC
approves such BRP without any dilution, it
shall record reasons for its approval.

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Termination of PPIRP

PPIRP shall be terminated by the Adjudicating Authority on the following grounds:

1 2 3 4 5

No Resolution Plan CoC did not approve
approved by CoC the plan selected after
within 90 days competing with BRP in
the manner specified
by IBBI
CoC, with 66% voting
share, resolved to
terminate the PPIRP
CoC, with 66% voting Adjudicating Authority
share, resolved to rejected the
initiate CIRP against Resolution Plan as it
the CD does not conform to
requirements u/s 30(2)

6
Where Adjudicating Authority ordered for vesting
of management of CD with RP and the CoC
approved a resolution plan which does not result
in change in management or control of CD
(refer note)

Note: - In ground no. 6, the Adjudicating Authority shall also order for liquidation.
- In the event of termination, CD shall bear the PPIRP costs, if any.
- After termination, the Adjudicating Authority shall provide for the manner in which the proceedings of
Avoidance Transactions shall continue.
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Liquidation of Corporate Debtor

Adjudicating Authority is of
the opinion that the affairs Adjudicating Authority shall
nn ot
of the CD during PPIRP: pass an order vesting the oC ca e
P , C e th
e C IR id at
- have been conducted in management with the
Unlik
o liq u u ring
fraudulent manner Resolution Professional id e t
b to rd
dec rate De
- grossly mismanaged p o P
C o r PPIR

CoC approved resolution No Resolution Plan CoC did not approve the
plan which does not result approved by CoC within resolution plan selected after
in change in management 90 days competing with BRP in the
or control of CD manner specified by IBBI

Adjudicating Authority
Where a resolution plan Adjudicating Authority
shall declare that PPIRP
approved under PPIRP is shall pass an order for
costs shall form part of
contravened by the CD liquidation
liquidation costs

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Migration into CIRP

CoC may, by 66% voting RP to intimate Adjudicating

At any time after PPICD and before share, resolve to initiate CIRP Authority of the decision
approval of Resolution Plan against the CD taken by CoC to initiate CIRP
against the CD

1 3 5

Order of Adjudicating Proceedings initiated Duration of PPIRP shall

Authority shall be for avoidance of be included in the Adjudicating Authority shall, by
deemed to be order transactions and u/s relevant time / period order:
of admission u/s 7 & 66 & 67A shall for avoidance
CIRP shall commence
- Terminate the PPIRP
continue during CIRP transactions
from date of such - Appoint RP under PPIRP as
order 2 Interim Resolution Professional
4
for the CIRP
CIRP shall commence
- Declare that PPIRP costs shall
The relevant time /
from the date of period for avoidance be included in IRP Costs
order of the transactions shall be
Adjudicating 2 yrs / 1 yr, preceding
Authority PPICD instead of CIRP
commencement
date

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Abbreviations Used

BRP Base Resolution Plan IP Insolvency Practitioner

CD Corporate Debtor MSME Micro, Medium and Small Enterprises

CIRP Corporate Insolvency Resolution Process OC Operational Creditor

CoC Committee of Creditors PPICD Pre-packaged Insolvency Commencement Date

FC Financial Creditor PPIRP Pre-packaged Insolvency Resolution Process

IBBI Insolvency and Bankruptcy Board of India RP Resolution Professional

IM Information Memorandum S/R Special Resolution

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Disclaimer: While all reasonable efforts have been made to ensure that this info-graphic is free of errors and omissions, please consult the officially published Insolvency and Bankruptcy
Code, 2016 and the rules and regulations made there under and the Insolvency and Bankruptcy Code (Amendment) Ordinance, 2021, in case of any doubts.