Pre-packaged insolvency fails to take off as bankers wary of voluntary haircuts
SummaryThe pre-pack model of insolvency resolution for smaller firms has failed to gain traction due to concerns of impropriety by bankers. Only four companies have used the scheme since its introduction in April 2021.
New Delhi: The pre-pack model of insolvency resolution introduced over two years ago to speed up the rescue of smaller firms has failed to take off, as bankers worry that the voluntary haircuts they opt for could lead to allegations of impropriety in the future. This, despite the fact that court approvals mandatory for all bankruptcy rescues, offer protection in case of an investigation.