GCCL Infra first to take pre-pack insolvency route

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GCCL Infra first to take pre-pack insolvency route

GCCL Infrastructure & Projects (GCCL) has become the first to initiate the pre-packaged insolvency resolution process (PIRP), which was subsequently admitted by the Ahmedabad bench of the National Company Law Tribunal.

To deal with the financial and economic distress of small businesses that were significantly impacted due to the covid-19 pandemic, the PIRP was introduced under chapter IIIA of the Insolvency and Bankruptcy Code, 2016 (IBC), earlier this year.

The aim for introducing the mechanism was to provide an alternative resolution process for entities that qualify as a micro, small or medium-sized enterprise (MSME) under sub-section (1) of section 7 of the Micro, Small and Medium Enterprises Development Act, 2006, in a manner that is friendly and effective, with a shorter timeline and an efficient methodology.

The PIRP enables the creditors and owners of a business to agree to sell the business to an interested buyer. The buyer may be a third party or someone related to the business. The PIRP, in contrast to the corporate insolvency resolution process (CIRP), has a hybrid structure that blends both a formal and informal approach to addressing insolvency issues.

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The dispute digest is compiled by Numen Law Offices, a multidisciplinary law firm based in New Delhi & Mumbai.

The authors can be contacted at support@numenlaw.com.

Readers should not act on the basis of this information without seeking professional legal advice.