There are chances for debt-stress with business units. A unit may fail on account of innovation and competition. Inefficiency of the teams may also a cause for not doing well. Force majeure circumstances may also cause for debt-stress. There are also many internal and external reasons for debt-stress. Closure of such viable business is not in the interest of the stake holders-shareholders, creditors, employees, suppliers, customers, and the economy. Most such companies are viable. Just they have to overcome the debt-stress. Once normally returns, they would start earning normal profits. It is necessary to facilitate stakeholders to resolve the stress well in time before the financial stress degenerates to economic stress making resolution impossible.
“The RBI provides a prudential framework for early recognition, reporting and time bound resolution of stressed assets. This framework applies to entities such as banks and non-banking financial companies regulated by RBI. There is RBI scheme made available to those MSMEs whose aggregate exposure to banks and NBFCs do not exceed Rs 25 crores as on 1st day of march,2020 and it was a standard asset as on that date. Pre-pack insolvency resolution process (PPIRP) is the newest option and the latest addition to insolvency and bankruptcy code, 2016. PPIRP is inserted in IBC code as chapter Ⅲ A consisting of sections 54 A to 54 P by IBC code (Amendment) Act, 2021. As nomenclature suggests, PPIRP is a restructuring plan which is agreed to by the debtor and its creditors prior to the insolvency filing, and then sanctioned by the court on an expedited basis. In PPIRP, a troubled company and its creditors negotiate the terms of an insolvency resolution plan prior to the commencement of the formal insolvency process, which allows formal process to be implemented at maximum speed. PPIRP is available in respect of registered MSMEs who are companies or LLPs. PPIRP maximizes value by concluding the process early with less cost. It can be designed to build elements of a public process to maximize value further. ASPIRE FOUNDATION, with its network partner, can extend debt-stress support in compliance with the law”.