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A government-appointed panel to recommend a framework for pre-packaged insolvency under the current insolvency regime in the country is expected to soon submit its report, Sudhaker Shukla, Wholetime Member, IBBI, has said.
He said that the government will have to decide the roll out model for pre-packs after considering the report of the Committee set up under the Chairmanship of M.S.Sahoo, who is the current Chairman of the Insolvency and Bankruptcy Board of India (IBBI).
Indications are that the report will be submitted to the Government in next 2-3 weeks.
The Corporate Affairs Ministry had in March this year set up a sub-committee of the Insolvency Law Committee to propose a detailed scheme for implementing pre-pack and prearranged insolvency resolution process. This seven-member panel was also asked to look into pre-requisites for initiation of Pre-packaged insolvency resolution process (PPIRP) in terms of default and threshold, appointment of insolvency professional, role and responsibility of committee of creditors, moratorium, expected cost of process timelines for completion of process.
Having a pre-pack like those in developed jurisdictions will help in achieving faster insolvency resolution under the IBC. The process would likely be completed much faster than the traditional Corporate Insolvency Resolution Process. Having a pre-pack framework would act as an important alternative resolution mechanism to the CIRP and would help lower the burden on National Company Law Tribunal, say insolvency experts. Also, in a pre-pack the incumbent management retains control of the company until a final agreement is reached. There are some drawbacks in pre-packs such as reduced transparency.
Distressed assets platform
Meanwhile, hectic activity is currently underway for setting up a platform for distressed assets. This platform, which is expected to be soon functional, is being set up under NESL, an information utility. Already, the virtual data room has been launched from Oct 1 and an auction facility will soon be introduced in the next six months, according to Shukla.
Post the enactment of Insolvency and Bankruptcy Code in 2016, there has been big shift in behaviour among corporate debtors and promoters. In the last four years, under IBC, 270 Corporate Insolvency Resolution cases have been resolved, releasing $ 30 billion in capital. Recoveries have increased from 26 cents to a US dollar to 71 cents to a US dollar. Nearly, 50,000 cases have been withdrawn prior to IBC leading to release of capital to the tune of $ 90 billion. The time for resolution too has come down sharply from 4.3 years to 1.6 years now.
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