Alerts & Updates 1st Oct 2024
The introduction of the Pre-Packaged Insolvency Resolution Process (PPIRP) in 2021 was seen as a significant step in speeding up insolvency proceedings for MSMEs. However, its success was limited due to a complex procedure, lack of flexibility, and the preference of creditors and corporate debtors for alternatives like One-Time Settlements (OTS). With PPIRP failing to gain traction, the Insolvency and Bankruptcy Board of India (IBBI) is now exploring the Creditor-Led Resolution Process (CLRP) to address the significant delays in the admission stage of Corporate Insolvency Resolution Process (CIRP). However, the CLRP does not appear to be a true creditor-led process but rather a hybrid mechanism, combining elements of creditor initiation with the debtor’s continued control of the business. In this alert, we explore the framework of CLRP, its objectives, and the challenges it may present for financial creditors, particularly banks.
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