Personal guarantees will likely get a disproportionate share of attention as experts craft the broad role definitions for professionals handling pre-packaged debt resolutions at MSMEs.
MUMBAI: Personal guarantees will likely get a disproportionate share of attention as experts craft the broad role definitions for professionals handling pre-packaged debt resolutions at MSMEs.
Personal guarantees seem to be a top priority in defining the role of an insolvency resolution professional (RP), said a source.
The RP needs to get it confirmed with lenders as to whether the resolution plan is a composite one covering personal guarantees, said an interim report on the subject. ET has seen a copy of the report.
“Group Company cross guarantees / cross personal guarantees also needs to be addressed before getting into the resolution process under this scheme,” said the panel of the Indian Institute of Insolvency Professionals of ICAI or IIIPI.
“It cannot be initiated on an apprehension of insolvency,” says the special panel in the report.
RPs are advised to collect claims and finalise the list of creditors within 21 days.
An MSME should not have gone through any insolvency resolution process three years before applying for the pre-pack scheme. The RP should invite resolution plans within 21 days from the date of commencement.
“If no plan is received by the last date of submission, the RP may seek permission of the CoC to extend the timeline, provided that the total time period of 90 days to submit a plan to the Adjudicating Authority is not compromised,” said the report.
However, if no plan is approved, then termination applications will be filed by the RP. Unlike general insolvency resolutions, a resolution professional is not required to make the public announcement in newspapers and neither is the public announcement required to invite claims. “The intent of the public announcement is to make creditors of CD aware of the initiation of PPIRP.”
Nearly two dozen people are members of the study group, which is chaired by G. Ramaswamy, IP & past president, ICAI. It is also coming out with an FAQ on prepack for MSMEs.
With the pandemic receding fast, the study group pitches for both physical and digital/electronic copies that an insolvency professional needs to keep while dealing with PPIRP.
The resolution professional shall preserve a physical as well as an electronic copy of the records relating to the process of the corporate debtor as per the record retention schedule, as may be required by the Board in consultation with insolvency professional agencies.
Insolvency professionals are also suggested to ensure first that a corporate debtor opting for PPIRP is a certified entity under Udyam Registration, a dedicated government platform for MSMEs.
“In case of financial debt, checking that the record of default is obtained through the Information Utility to prove the existence of debt and extent of default. If there is any default in realization of payment from the Resolution Applicant, RP shall serve a notice to the RA to honour the committed payments immediately within seven days or such grace period as may be approved in the resolution plan,” the study group said.