Overview of Insolvency & Bankruptcy Code, 2016
Introduction to the Insolvency and Bankruptcy Code, 2016 covering its applicability, objective, pillars, Corporate Insolvency Resolution Process (CIRP), corporate persons, threshold requirements, initiators of CIRP, and application processes for financial and operational creditors.
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Presentation Transcript
OVERVIEW OF INSOLVENCY & BANKRUPTCY CODE, 2016
INTRODUCTION APPLICABILITY: COMMENCEMENT: A company A Body Corporate A LLP Personal or Corporate Guarantors Partnership Firms or any other Associations Individuals The date of commencement of IBC, 2016 is 28.05.2016. However, the CIRP process came into effect from 01.12.2016.
INTRODUCTION OBJECTIVE FOUR PILLARS Simplifying the insolvency resolution process Collation of multiple laws under one Umbrella Ease of doing Business Time bound manner INSOLVENCY BANKRUPTCY BOARD OF INDIA INSOLVENCY PROFESSIONAL AGENCIES INSOLVENCY PROFESSIONAL INFORMATION UTILITY
CIRP UNDER IBC, 2016
CORPORATE PERSON As defined under Section 3(7) of IBC, 2016, we can conclude that following are termed as CORPORATE PERSON: - A Company A LLP Any other person incorporated with limited liability NOTE: - SHALL NOT INCLUDE FSP
THRESHOLD The recent amendment in Section 4 of the Insolvency & Bankruptcy Code, 2016 has threshold of default for initiation of CIRP against a C.D. from Rs.10 Lakhs to Rs.1 Crore. increased the
WHO MAY INITIATE CIRP FINANCIAL CREDITORS (SECTION - 7) OPERATIONAL CREDITORS (SECTION - 8&9) CORPORATE APPLICANT (SECTION 10)
APPLICATION FOR INITIATION OF CIRP BY F.C. REQUISITES: A. Record of default or Evidence of default B. Name of IP to act as an IRP C. Any other information.
APPLICATION FOR INITIATION OF CIRP BY O.C. REQUISITES: Demand Notice or Copy of Invoice demanding payment An affidavit certifying No Dispute A copy Certificate from FI regarding no payment by CD Copy of Record of IU NOTE: NOT MANDATORY TO PROPOSE IP AS IRP
APPLICATION FOR INITIATION OF CIRP BY C.A. REQUISITES: Information relating to Books of Account Information relating to appointment of IP as IRP SR passed by Shareholders OR Resolution passed by 3/4thof partners of CD
ADMISSION/REJECTION In the order of admission of the Application(be it under Section 7/9/10), Following 3 events transpires: INSOLVENCY COMMENCEMENT DATE APPOINTMENT OF IRP COMMENCEMENT OF MORATORIUM PERIOD
AFTERMATH OF ADMISSION PUBLIC MANAGEMENT VESTS WITH IRP ANNOUNCEMENT Immediately(i.e., not later than 3 days of Appointment of IRP), IRP shall make a public announcement in One English daily N.P. One Regional language N.P. Website of CD, if any Designated website, if any by IBBI Management of affairs of CD shall vest with IRP Powers of BOD or the partners shall stand suspended Execution of documents by IRP on behalf of CD Responsible for compliances
CLAIMS INVITATION VERIFICATION COLLATION
CONSTITUTION OF COC Of all the responsibilities and obligations that the IRP is borne Constitution remains chief task of the IRP. with, COC of
COC CONSTITUTION REPORT Within verification of claims, A report certifying constitution of COC shall be placed Hon ble Tribunal. 2 days of the before the
FIRST COC MEETING IRP shall hold 1stCOC meeting within 7 days of COC Constitution Report In other words, 1stCOC is to be held within 30 days from Insolvency Commencement Date Confirmation of IRP as RP or Replacement of IRP
REGISTERED VALUERS Resolution Professional shall within 7 days of his appointment but not later than 47th day from ICD, Appoint Valuers so as to determine the Fair Value and Liquidation Value of Corporate Debtor 2 Registered
MODALITIES OF COC MEETINGS
INFORMATION MEMORANDUM EXPRESSION OF INTEREST IM is to be issued to the COC within 2 weeks of appointment of RP, but not later than 54 days from the ICD. The Expression i.e., Form G is to be issued within 75 days of ICD. invitation of for Interest
ISSUE OF RFRP Resolution Professional shall within 105 days from the Insolvency Commencement including Evaluation Matrix Memorandum. Resolution Professional financial information to all the Prospective Resolution Applicant such as, IM EM Financial Statements Date, issue Information RFRP, and shall provide necessary
FILTER OF SECTION 29A Section 29A is a negative list for Resolution Applicant. It provides which disqualifies persons from Resolution Plan by adhering to the role Applicant for scenarios certain submitting of Resolution
LITMUS TEST OF RESOLUTION PLAN The Resolution Plan shall conform to the criteria laid down under: Section 30(2) of IBC, 2016 AND Regulation (37)&(38) of IBBI(Insolvency for Corporate Persons) Regulations, 2016
EXISTENCE OF P/F/U/E PREFERENTIAL TRANSACTIONS (SECTION 43) UNDERVALUED TRANSACTIONS (SECTION 45) FRAUDULENT TRANSACTIONS (SECTION 66) EXTORTIONATE CREDIT TRANSACTIONS (SECTION 50)
APPROVAL OF RESOLUTION PLAN AND THE ASPECT OF TIE-BREAKER FORMULA
EXTENSION OF CIRP PERIOD AND DILEMMA OF PENDING LITIGATIONS
PROVISIONS OF APPEAL SUPREME COURT 45D + 15D NCLAT 30D + 15D NCLT
THE OVER-RIDING FACTOR AND BUBBLE OF PROTECTION FOR CD
LIQUIDATION PROCESS THE LAST RESORT
WHEN AND WHY OF LIQUIDATION Section 33 of the Code provides for scenarios under which the liquidation process of CD may be ordered, they are: Non-receipt of Resolution Plan Rejection of approved Resolution Plan by the Adjudicating Authority COC votes for liquidation (minimum 66%) Contravention of Resolution Plan
PREMATURE LIQUIDATION The COC has powers to proceed directly for liquidation of CD at any time after constitution but before the confirmation of Resolution Plan, including at any time before the preparation of Information Memorandum
CLAIMS INVITATION VERIFICATION COLLATION
REGISTERED VALUERS The Liquidator as per the provisions of Regulation 35(2) of Process) Regulations, 2016 shall within 7 days of Liquidation Commencement Date (LCD), Appoint 2 Registered Valuers so as to determine the Realisable value of the assets of the Corporate Debtor. IBBI (Liquidation
ASCERTAINMENT OF LIQUIDATION ESTATE COMPRISING OF ASSETS OF CD
PROGRESS REPORT As the name suggests, Progress report is to be prepared and submitted by a Liquidator to the Adjudicating Authority within 15 days after: The end of quarter in which the Liquidator was appointed The end of every quarter during which he acts as Liquidator
CONSTITUTION OF SCC STAKEHOLDER CONSULTATION COMMITTEE: The role of consultation committee unlike the COC is quite limited and advisory based. The SCC advises the Liquidator on following: Appointment of Professionals and their Remunerations Sale and manner of sale of assets of CD NOTE: LIQUIDATOR SHALL CONSTITUTE SCC WITHIN 60 DAYS FROM LCD
ASSET MEMORANDUM, PRELIMINARY REPORT AND LIST OF STAKEHOLDERS
ASSET SALE REPORT Liquidator shall prepare an Asset sale report, and the same is to be enclosed with the Progress Reports. CONTENTS: Cost of realization Manner and mode of Sale Person to whom the sale is made Reasons if value realized is less than value in AM.
WATERFALL ARRANGEMENT UNDER IBC, 2016
INSOLVENCY PROCEEDINGS AGAINST PERSONAL GUARANTORS
PERSONAL GUARANTORS COMMENCEMENT APPLICABILITY The rules and regulations framed for this reference by the IBBI came into effect on and from 01.12.2019 In addition to this rules and regulations for bankruptcy process has also been introduced by IBBI The insolvency proceedings may be initiated against any Individual or Partnership firm who has in lieu of debt of CD provided guarantee of payment. In light of recent Judgements pendency of CIRP is not a precondition
APPLICATION BY CREDITOR/S BY DEBTOR/S Either himself or through an RP If CIRP against CD is going on then the application shall be filed on the same bench. Debts shall not be EXCLUDED DEBTS Either himself or through an RP If CIRP against CD is going on then the application shall be filed on the same bench. Evidence of default and other necessary documents
INTERIM MORATORIUM DURATION EFFECT COMMENCEMENT: The Interim Moratorium period starts with the filing of application before the AA END: The period comes to an end with the acceptance/rejection of application With the commencement of interim moratorium and until its end: Stay on legal actions that are pending pertaining to any debt Creditors cannot initiate any other proceedings in respect of any debt
REPORT BY RESOLUTION PROFESSIONAL RECOMMENDING ADMISSION OR REJECTION OF APPLICATION
ADMISSION/REJECTION On the basis of RP Report, the Adjudicating Authority may admit or reject the application. In case of admission, the date of admission would commencement date. be Insolvency Moratorium Period would get in action from this date.
PUBLIC NOTICE The Adjudicating Authority shall issue a public notice within 7 days of passing the order of admission for inviting CLAIMS within 21 days of the aforesaid issue. INVITATION VERIFICATION COLLATION
LIST OF CREDITORS The Resolution Professional shall prepare list on the basis of: Information disclosed in the application Claims received pursuant to the public notice NOTE: LIST OF CREDITORS IS TO BE PREPARED WITHIN 30 DAYS OF PUBLIC NOTICE
REPAYMENT PLAN POWERS TO RP SHALL INCLUDE To carry on the business of Debtor on his/her behalf Justification for the plan and basis on which creditors may agree Realise the assets of the Debtor Provision for payment of fee to the RP Admisinster or dispose any funds of the debtor Implementation schedule
REPORT BY RESOLUTION PROFESSIONAL ON REPAYMENT PLAN
MEETING OF CREDITORS Resolution report shall specify whether or not to call a meeting of Creditor. In case RP decides against calling of meeting, reasons for the same is to be provided In summoning meeting at a venue, convenience of creditors considered Professional in his/her shall be
REPORT OF MEETING OF CREDITORS ON REPAYMENT PLAN
