A critical analysis of India's pre-pack regime for MSMEs

Hybrid restructuring procedures, such as pre-packs, have been encouraged to deal with an expected increase in insolvent firms in the aftermath of the COVID-19 pandemic. Pre-packs have been gaining popularity as a restructuring mechanism across the world. India too introduced a pre-packaged insolvency resolution process for micro, small and medium enterprises (MSMEs) in April 2021. This article first provides a brief overview of the pre-pack models employed in certain other jurisdictions such as the United States of America, United Kingdom and Singapore with a view to understanding the key features of pre-pack models and how they have been operationalised in these jurisdictions. It then briefly discusses other restructuring avenues, that were available to a corporate debtor in India, and the circumstances that led up to the introduction of pre-packs in India. Finally, it provides a detailed overview of the Indian pre-pack regime and evaluates its effectiveness for MSMEs, potential issues that may cause delays in the process and how the current pre-pack regime can be further streamlined. It argues that some of the procedural requirements and features of the Indian pre-pack regime may not be suitable for MSME insolvencies.