Pre-Packaged Insolvency (PIRP) for MSMEs: Section 54A Eligibility, 66% Consent, Base Resolution Plan and the 120-Day Clock
Pre-packaged insolvency is the only formal insolvency route in India where the promoter stays in the driver's seat. It exists exclusively for MSMEs, it runs on a 120-day statutory clock, and it starts with something most distressed businesses never prepare: a resolution plan agreed with lenders before anyone goes to the tribunal.
- Check whether your company actually qualifies under Section 54A and Section 29A
- Understand the 66% financial-creditor consent that makes or breaks the filing
- See how the base resolution plan and Swiss challenge decide who ends up owning the business
What this PIRP guide covers
This page is for general information. It is not legal, tax or investment advice. Every NPA / SARFAESI / DRT matter is fact-specific — speak to a qualified advisor before acting.
PIRP at a Glance
Thresholds and timelines are set by the Code and by notification. Confirm the current notified figures for your filing date before acting on any number.
| Element | Requirement | Note |
|---|---|---|
| Who can use it | Corporate debtor that is an MSME | Section 54A |
| Who initiates | The corporate debtor | Not the creditor |
| Control of business | Promoter / existing management | Debtor in possession |
| Creditor consent | 66% in value of unrelated financial creditors | For filing and for the RP |
| Base resolution plan | Prepared before filing | Submitted with the application |
| Swiss challenge | Where the base plan impairs operational creditors or is rejected | Competing plans invited |
| Plan approval window | 90 days to submit to the tribunal | From commencement |
| Total duration | 120 days | Statutory design |
| Moratorium | Applies on commencement | Enforcement actions stayed |
Why a separate insolvency route was created for MSMEs
Ordinary corporate insolvency was built for large, professionally managed companies. Displacing the promoter, running a full public bidding process and absorbing months of professional cost destroys value in a business whose main assets are its owner's relationships, order book and know-how. For most MSMEs, conventional CIRP was a route to liquidation rather than rescue.
Pre-packaged insolvency answers that by moving the hard work before the filing. Lenders and the promoter negotiate a plan first; the tribunal is then asked to bless a deal that already has support, within a compressed timetable. Because the promoter is not displaced, the business keeps trading and the value being rescued does not evaporate while the process runs.
Eligibility: the tests that stop most applications
Three filters do the work. First, the corporate debtor must be an MSME — the classification under the MSMED Act, not merely a small turnover. Second, there must be a default meeting the notified threshold for initiating a pre-pack. Third, the company and its promoters must clear the eligibility conditions the Code imposes, including the Section 29A disqualifications that govern who may submit a resolution plan.
There are also process preconditions: a declaration about the base resolution plan, approval by the members of the company, and the approval of unrelated financial creditors holding at least 66 per cent in value, who must also approve the proposed resolution professional. Missing any of these is the most common reason a pre-pack does not get off the ground.
MSME status under the MSMED Act, evidenced by a current Udyam registration.
66% in value of unrelated financial creditors, obtained before filing.
Section 29A screening applies to who may submit a plan.
The base resolution plan and the Swiss challenge
The base resolution plan is the offer the promoter brings to the table. It sets out how creditors will be treated, what is being infused, and over what period. The committee of creditors examines it, and where it does not impair operational creditor claims and is approved, it can be taken forward directly.
Where the base plan impairs operational creditors or the committee is not satisfied, the process opens to competing plans — the Swiss challenge. Others may bid, and the promoter's plan can be displaced. This is the disciplining mechanism that stops a pre-pack becoming a quiet write-off in the promoter's favour, and it is why the quality of the base plan matters so much.
What a workable pre-pack actually needs
In practice the deciding factor is not the law but the preparation. A pre-pack that succeeds arrives with audited numbers that lenders trust, a credible source of funds, a realistic view of what the business earns after restructuring, and a lender group that has already been walked through the plan individually before being asked to vote.
The alternative comparison matters too. Lenders will test the plan against what they would realise in liquidation and against a straightforward settlement. If a one-time settlement funded from outside the business produces a better and faster recovery, that is usually the route they will prefer — which is why we model both before recommending a pre-pack.
Anonymised outcomes from live files
Details modified to protect client confidentiality; commercial arithmetic preserved.
PIRP — answered questions
Find out whether a pre-pack is realistic for your company
Share the lender group, the outstanding and your Udyam classification. We will tell you whether the 66% consent is achievable and whether a settlement would serve you better.