Pre-pack scheme for insolvency banks on fair debtor-creditor ties

The journey of a pre-pack starts with an informal understanding, engages stakeholders, and ends with a judicial blessing of the outcome

The pre-packaged scheme, touted as the next stage in the evolution of the Insolvency and Bankruptcy Code (IBC), 2016, will attempt a balancing act, as lawmakers put together an informal arrangement with a debtor-in-possession and creditor-in-control model, as suggested in the draft proposal of the sub-committee of Insolvency Law Committee. 

The scheme involves a step before the insolvency resolution, where creditors and the promoter agree on a plan to resolve the stressed company before admission of insolvency application. This plan can come from the promoter, if eligible under section 29A of IBC, or from a third party. 

While this will