IvrernationaLJournat or MuttioisctpuinaryEpucaTionat Research ISSN:2277-7881; Iwracr Factor :6.514(2020); IC Vawe:5.16; ISI Vawe:2.286 CORPORATE INSOLVENCY IN INDIA AND OTHER COUNTRIL ‘STUDY Dr. Binoy J. Kattadiyil and CS. Peer Mehboob ICSI MP, IPA of IBBI, New Delhi Introduction The Insolvency and Bankruptey Code 2016 (hereinafter referred to as “C in phases since August 5, 2016, was enacted to overhaul the outdated and complex corporate insolvency laws in India to address an economy-wide problem of bad loans, with its resulting Jmpact on the banking sector and access to credit. The Code has also materially impacted the rates of default on loan repayments. In other words, repayment rates have materially improved owing to a fear among controlling shareholders of Indian debtors that they may lose control of| their (largely) family owned businesses if placed in insolvency. It is therefore equally important for existing creditors and sharcholders to take note of the change in debtorcreditor dynamics introduced by the Code, given that it is now possible for creditors to eredibly enforce ther ight, including in ways that result ina change in ownership of debtors This Research Article focuses on the aspects of the practical implementation of the Insolvency and Bankruptcy Code, 2016 in India ‘The timelines have been drastically changed to tackle the Gelay in settlement of cases under the said law; however its practical impact is matter of assessment and therefore the necd for present research. Four years since passing of this legislation, this article seeks to analyze the effectiveness ofthe Indian Insolvency Law (IBC) in comparison with its counterparts. This Article has dravm a comparison of insolvency and bankruptcy legal procedures in India from other countries such as US, UK, Gerrmany, Singepore, and Australia, Comparative Analysis of Insolvency Laws ‘One of the usual question that arses in our minds is how is the Indian IBC 2016 compared to other Insolvency Codes practiced internationally. Since intemationally Insolvency and bankruptcy Jaws have been in place for 2 long time, and have dealt with several cases a look into thei laws ray give some more insight. As we know, IBC 2016 was enacted in May 2016 and is therefore, young and evolving. It should be really appreciated how proactively and speedily the regulator (insolvency & Bankruptey Board of India) is reacting to every emerging situation by bringing rules and regulations to deal with varios situations appropriately The World Hank's Doing Business report assesses 190 economies on eleven parameters) every year, The doing Business (DB) projet of the World Bank provides useful data on the case of Soing business, rank each location and recommend reforms to improve performance in each ofthe indicator areas. DB studies the time, cost and outcome of insolvency proceedings involving domestic entities as well asthe strength of the legal framework applicable to liquidation and reorganization proceedings, The data forthe resolving insolvency indicators are derived from "eleven paramters used by World bank to astese Fase of Doing Business: sing «burns, desing with esucton permis ging elec, sestring property, sting cei, ptetng minority invests, ring tte, mdi acs borders, our market regulon cfcngcoatacs and eslvng salve. www.ijmer.in Peer Reviewed: VOLUME: 9, ISSUE: 7(9), JULY: 2020 Page 149 of 261‘sis SSN:2277-7881; Inract Factor :6.514(2020); IC Vawwe:5.16; IS] Vawe:2.286 ‘questionnaire responses by local insolvency practitioners and verified through a study of laws and regulations as well as public information on insolvency systems. The ranking of economies on the cease af resolving insolvency is determined by sorting their distance to frontier scores fr resolving insolvency. These scores ate the simple average of the distance to frontier scores for the recovery rate and the strength of insolvency framework index The ble below provide a comparative snapshot of the rankings of ease of doing business and resolving insolvency, asthe study is focused, “Table 1: Ease of Doing Business and resolving insolvency Ranks from the year 2017 to 2020 ‘Country Ease of doing business Ease of resolving insolvency. BOT ] 2018 | 2019] 2020 | B07 | 2018 | 2019 as | a9 | a9 | a9 | a9 | a9 | a9 Tada A United States | — § * ps | 6 5 3 3 ws) United 7 a Kingdom(UK) ‘Germany mw pa [es a 7] Singapore 2 z~)2 [2] 39 | 3F | 27 [Austeatia Tass [at is 2 ‘Source: compiled from World Banks Doing Business report 2017 to 2020 ne above table clearly signifies, nationavse progress achieved in ease of doing business and resolving rsolvency from the year 2017 to 2020, Indis made remarkable progress, India’s huge stride towards bcoming a business-iendly nation has come inthe lst wo years, with a total jump of $3 places inthe year 2019 and 14 places in the year 2020, Singapore hus been consistent throughout these yeas. As for Ease of Resolving Insolvency", Indias ranking declined by five places to settle at 108. This ‘occurred despite the adoption of the Insolvency and Bankruptcy Cade, which has started to show promising results on the ground. The other nations have more or less changes in rankings when ‘compare from 2016 to 2019, The DB report, ultimately emphasis continuous reforms in policies and legislations for the smooth functioning of business activities in any nations. The reports published by World Bank are taken into consideration for analysis World Bank's Doing Business studies the time, cost and outcome of insolvency proceedings involving domestic legal entities. These variables are wed to calculate the recovery rate which is recorded ascents nthe dollar recovered by secured creditors through reorganization, liquidation or debt enforcement (foreclosure or receivership) proceedings. To determine the present value of| the amount recovered by creditors, Doing Business uses the lending rates from the Intemational ‘Monetary Fund, supplemented with data from central banks andthe Economist Intelligence Unit Table 2: Insolvency Resolution Parameters and Credit Data Tadicator [India [US [Germany | UK | Australia [ Singapore Rank ev 2 a Ts 20 2F | Recovery | 714% | 81% | 9AM | 81% | 82TH | ARTI Rate Time 1 To 1a wo To OF (years) Source: World Bank Dalng Business Report, 201 * psi doingbusinss. olen daalexplortopieseslving insolvency www.ijmer.in Peer Reviewed: VOLUME: 9, ISSUE: 7(9), JULY: 2020 Page 150 of 261(@ J) wreanavionaJournat or MucotsciptinanyEoucarionat Rescanci mie” YSSN:2277-7881; InractFacroR:6.514(2020); IC Vawe:5.16; IS] Vau:2.286 ‘According to a World Bank Doing Business Report, 2019, it takes an average of 1.6 years for insolvency resolution of & company in India, whereas its 1.0 year in US, UK and Australia, 12 years in Germany and it takes 0.8 years in Singapore, Also, recovery rate is 71.6% lower than ‘other countries in comparison, AL this juncture, itis pertinent to examine the practice in other jurisdictions for some guidance in bringing about reform in Indian insolvency regime. The reason for selecting the comparison of insolvency laws between India and these counties, i that as per the rankings of World Bank, India ranks at S2 in its insolvency resolution, while US ranks at 2, Germany is at 4, UK is at 14 Australia and Singapore are at 20 and 27 respectively. Hen improving but there is stil @ long way to go for India in ‘comparison with these counties, (Criteria of Cross Country Comparison of Insolvency Framework: S.No. __| Factors of Comparison | Deseription 1 Taltiation of Process: | Creditors avo usally the ones who iniiater -Who can initiate insolvency process, However, there can be reversal How is it initiated of this process too. Further, creditors may be of differest types ie. financial, operational, secured, unsecured ee Period of Insolvency | Insolvency proceeding is a time bound process of resolution or if resolution is not work out then liquidation Management during | Control may be reiained by BOD oF RP cIRP. z Resolution Plan The objectives of the management i to opt for reorganization of the firm. On the other hand, creditors are more likely to suggest measures which are quick lke sale of assets or entre business so as te liguidate the firm. The resolution plan is adapted ‘by Committee of Creditars Moratorium Tae moratorium in terms of IBC is described as @ Period wherein no judicial proceedings for recovery, enforcement of security interest, sale or transfer of asses, of termination of essential contacts ean be insured or continued against che Corporate Debtor, Everyone must have fair share by following @ ‘waterfall mechanism which gives priority to secured creditors over unsecured creditors, weatment for ‘employees and government dues are also prescribed 7 Tasolvency Proceeding | Costs is ovcurred curing insolvency proceedings Costs Generally the such cast is born by the person who initiate the proceedings = Role of IPs and ] Role of IP and Courta/Tribunal ta the insolvency Courts Tribunals resolution process affect the cost of process as well asthe time taken, Insolvency Framework in United Kingdom “majority of legal systems in the most counties are founded on English Common Law. «surprise that the Code closely mirrors the UK Insolvency Regime. Although the www.ijmer.in Peer Reviewed: VOLUME: 9, ISSUE: 7(9), JULY: 2020 Page 151 of 261@) IwrernationaLJournat or MuttioisctpuinaryEpucaTionat RESEARCH ISSN:2277-7881; Iweact Factor Indian Insolvency and Bankruptey Code, 2016 is based on the UK structure, India hes identi {514(2020); IC Vauwe:5.16; ISI Vawe:2.286 J key aspects of the legislation that might not work in an Indian scenario, and therefore appropriately customized it for Indi, ‘COMPARATIVE CHART— UNITED KINGDOM AND INDIA. ‘Comparative Chart Basis of Comparison Ui Tasolveney Act, 1986 Tasolvency and Bankruptey Code, 2016, Who can start Insolvency & Bankruptcy Process = Creditors or + Debtor Company; oF 4 Holders of qualifying floating charges(QFC) ‘© Financial Creditors (See. 7 ‘© Operation Creditors (Sec. 9) & + Corporate Debtor (See. 10) ‘Moratoriom Yes, after the Court appoints ‘Yes, as por Section 14 Period Tor insolvency process 12 months with creditors consents / court's approval it can be extended upto 6 mare months 350 days Gestion 1) Management Control during insolvency proceeding ‘Management control passes. to insolvency practitioner or administrator. However the daily operations of the company remain in the hands of the directors, Tisolveney Profesional a IRPIRP, to be appointed by the ‘Adjudicating Authority. Board of directors gets suspended with the appointment of IRF Resolution Plan 8 weeks of Admin appointment or extended period as court may allow. The resolution plan approval requires a simple rajerity in value of those creditors present & voting TBased on the faformation memo (8.29), a revolution plan can be submitted (S 30), $ 30.4 needs that the plan is to be approved by CoC by 66% voting share. S 31 needs that such approved Resolution plan by CoC should be approved by AA, Sale of assets during insolvency “Ram Tike an agent oF the company, has the power to contract without personal Tiablity. They have the power to sell any of the debior property without the permission of the ‘RP may do so after the approval of CoC (8 28). Tasolvency Proceeding Costs Cost is Borne by Debi + CIRP initiated under See 719 Creditors + CIRD initiated under See 10 = Debtor When the provess comes to an end ‘dn ceases; one year oF any extended time and Administrator ether applies that process abjective is achieved or ‘Administrator application saying that no purpose can be achieved hence liquidateon TSO day with a ax 90 day one time extension (S 12) with the approval of Resolution plan by AA (S31) failing which liquidation proceedings as per S Peer Reviewed: VOLUME: 9, ISSUE: 7(9), JULY: 2020 Page 152 of 261‘sis SSN:2277-7881; Inract Factor :6.514(2020); IC Vawwe:5.16; IS] Vawe:2.286 Priorities of the |- Sccuredlende 7 Tnsolvency cost payments - to be read |- Expenses of the insolvent | - workmen dues for 24 from top to bottom in| estate ‘months the order of priorities |- Employees - 04 months | - Sccured ereitors prior to insolvency © Employees for preceding 12 = Prescribed Part” protected | months portion ofthe = Unsecured creditors ‘money to unsecured State dues or secured creditors ~ formulae creditors for any amount = Floating charge creditors unpaid 2 Unsecured ereditors = any remaining debts & = Equity bolders dues = Prefsharcholders = Equity holders Cross Border | - Inside FU ~ EU Insolvency | UNCITRAL Model Law on Insolvency Regulation Cross-Border Insolvency has = Outside EU - UNCITRAL | been recommended but not Model Law on Cross- | yet been adopted. Border Insolvency Proceedings Insolvency Framework in United States ‘Chapter 11 of US Bankruptey Code focuses on preserving reorganization or going concer value ‘over liquidation value, As a corollary, Chapter 11 assumes that the most efficacious way 0 achieve that results to retain management and enable multiple outcomes either through a plan of reorganization, a series of going concern sales and even a liguidating plan. Chapter I1 enables @ Wide range of proposals tobe pu ito a reorganization plan, including having the company and management survive the process. Chapter 11 eases fll into two general categories the “freefall” case or a pre-packaged or pre-negotiated case, Inthe former, elie is sought under Chapter 11 of the Bankruptcy Code without having an agreed exit strategy among the company and at least @ critical mass or core group of creditors, The later is characterized by commencing a Chapter 1 the development ofa consensus on the outcome ofthe ease (COMPARATIVE CHART — UNITED STATES AND INDIA. parative Chart Chapter Tl of US Bankruptcy 1 Tavolvency and Bankruptcy Code, Code 2016 Wo can start Taolvensy | + Delior Company Finacial Grodno (See Tp & Bankruptey Process 2 Opetation Creditors (See. 9 & + Corporate Debtor (See. 10), ‘Moratoriams ‘Yeu Ting Whe peion ia | Yes, as pet Section 14 Bankruptcy Court Period for —Tasolvensy | Period of 120 day exienble apis | S70 diye octon Ty process 18 months on sound reasons ‘Management Control | Management continues. DeSfor i | TioWvoncy Foestoral as TRPRF, during Insolvency | Possesion (DIP) approach is | to. be. appointed by the preceeding adopted ‘Adjudicting Authority. Board of rectors els suspended with the sppoisiment of RP Resolution Flaw Debtor favan exduaive pod of 04 | Based on the information mane months (ext upto I& months) to | Section 29) 2 revolution plan cn www.ijmer.in Peer Reviewed: VOLUME: 9, ISSUE: 7(9), JULY: 2020 Page 153 of 261IvrernationaLJournat or MuttioisctpuinaryEoucaTiona Research ISSN:2277-7881; Iwracr Factor:6.514(2020); IC Vawe:5.16; ISI Vawe:2.286 ope aad weak approval Rom | Se submited (S 30). Section 30 limuirod creditors & sharcholders | needs tht’ the plan is tobe within two months Fach lass of | approved by CaC by 66% voting Creditors whose rights fave been | share. Sexton 31 neede tht sich limpired to vote in favour by | approved Resolution plan by Cot ‘ajrty and 23 in amount actly | should be approved by AA, Sale of asrete during ] Section 303 slows # Gehor ww] RP may do water he approval oF Insolvency sulsantialy all of is asses ee of | CoC (Seaton 28). leas. This allows assets to be sold quickly and avoids futher eosion of Tasolvency Proceeding | Cort is born by Debior Lender may | + CIRP inated under Sen 707 Costs, provide france to Debtor aginst len |” — Creditors (Gaperion) over asses which are not | + CRP insted unde Se 10 Blaged other lenders Deboe When the process comer | Resolution plan contimation | 180 aay wilh @ max 90 day one toanend scharges debior's pre. obligation | Sme extension ($12) with the tothe than what is propored in the | approval of Resolution pan by AA pin. sf plan is aot canfimed then | (S31) fling which dation Conversion to Bankrupey procceding | proceodingsas pe S33. seperChapler ‘rlorifies af the payments |- Secured creators ~Tasaivensy com =o be read from top to |~ Insolvency proceeding cost | = workmen dues fr 24 bottom inthe order of |= Cisims arising diving the xp | months priorities peed = Secured eres = Employees wages & benefits| “Employees for preceding 12 2 Depositclaime montis 2 Gorttax aims = Unsecured sritors 2 Unnecured elas 1 Stte dies or secured 2 guy interes creditors forany arpount unpaid = anyremaining dete & aise = Prof sharcholders 2 _Eguity holder Grow Border Tasolency | Chapier T5 of US Baakrapicy Onde | UNCITRAL Model Taw oa Crow deals with the Crost Rordet | Rordst Insolvency har been Insolvency. US has alo subsantlly | recommended but not yet beso limplemested UNCITRAL Model | adopted Law on Cross Border Insolvency ito tee dames lgiltion Insolvency Framework in Australia ‘There are separate insolvency regimes in Australia for insolvent individuals and insolvent ‘corporations. The insolvency regime in Australia is primarily governed by the Corporations Act 2001 (the “Corporations Act") and its associated regulations, which provides the legislative amework for corporate insolveneies, and the Bankruptey Act 1966 (the “Bankruptey Act”) and its associated regulations, which provides a statutory regime for insolvent individuals, The position in Australia is thatthe key test of solvency isthe 'eash flow test, rather than the balance sheet test, ‘A company when in financial dif ‘ypes of external administrations: ‘may be placed into extemal administration. Thete are five www.ijmer.in Peer Reviewed: VOLUME: 9, ISSUE: 7(9), JULY: 2020 Page 154 of 261(@ J) wreanavionaJouRwat or Mut otsciptinanyEoucariouat Rescanc mie” YSSN:2277-7881; InractFacroR:6.514(2020); IC Vawe:5.16; IS] Vaw:2.286 + Receivers) + Voluntary administration; + Doed of company arrangement (7DOCA"); + Scheme of arangement or + Liquidation or winding up (Including provisional liquidation). Liquidation is ypically @ terminal administration, she purpase of which is to detest the company. I may be the inevitable outcome for hopelessly insolvent company, regardless of ‘which extemal administration first implemented The term “Insolvency” has been defined under the Corporations Act, 200lin the following terms: ‘a person is solvent if, and only if, the person is able to pay all the person's debts, as and when they become due and payable’. ‘This, a person who isnot solvent canbe called as insolvent.” Te Insolvency and Bankruptcy regime in Australia is constantly evolving through changes and reforms brought into the law. One such major overhaul of Insolvency regime in Australia is the introduction of the Insolvency Law Reform Act, 2016 (ILRA) which has amended dife legislations like the Bankruptey Act, 1966, the Corporations Act, 2001 and the Aust ‘Securities and Investments Commission Act, 2001 (COMPARATIVE TRALIA AND INDIA Comparative Chart ‘Basis of Comparison | Ausralian Tasalvency Law Tasolvency and Bankruptcy Cade, 2016 Lowe ‘governing | Baskrupicy Ad, 1965, the | Insolvency and Baskupiey governed Bankruptcy Corporations Aet, 2001 and the | by the. Insolvency and) Mankrapcy ‘Austalian Sccuties "and | Code, 2016 slong with Riles and Investments Commission Act, | Regulation famed theresner. 2001 ‘The Fodsal Cour of Ausland’ | Natonal Company Taw —Teitanal fhe Supreme Courts of cach | (Adjudiating Authority) and Appeals ‘Aasralian state and tertary have | are fled betore Nasional Company jirisditon to ear matters relating | Law Appelite Teisunal ¢Appelre tothe insolvency of eosporation. | Authocity) In the process of Voluntary sdminiration and. receivership, ‘fea uo cours se valved Taltation of vesoution | Creditors, Directors or Debor Transat Creditor, Operational process Credo or Corporate Debr ise Resolution roses > Resieeatip > Coxperte loa veney Revolt + Vointary Adminstration Protess(CIRP) Dest of Company | + Fast Track Insolvency: Ressution Arangement Process ‘+ Scheme farrangement tnpsresractarng skermskenzie somnp-conter uploads ste!28/2016/2/Globel-Resrctaring: Inaolveney-Guide-New Logo- Australia pd “hupirwwS aus du auauegsthconsol_aca2001172/9Sa hn www.ijmer.in Peer Reviewed: VOLUME: 9, ISSUE: 7(9), JULY: 2020 Page 155 of 261@) IwrernationaLJournat or MuttioisctpuinaryEpucaTionat RESEARCH ISSN:2277-7881; Iwract Factor :6.514(2020); IC Vawe:5.16; ISI Vawe:2.286 Tasolveney Professionals TA dali or thor nwyer en pick their a Trustee of Liguigitor as lang as the Trstee o Liquidator signe ‘consent form” agroving to be eppviated tod at. provide creditors with a Declaration of Independence, Relevant Relatiouships and _Tademaitos DIRK”) in their iat ‘communication, explaining why {heir appoiniment wil not pact their independence and’ ality to act objectively An individ who Tar cleared the Limited Insolvency Professional amination (and other eegutemens for registration with ISBN can acts & Resolation Professional for the Corporate Debtor upon approval fom the Comite of Creditors ‘Management —Contrar Proceeding + Receiversip: Reaver 2 Vohinary Administration including ‘DOCA Tisolvency Profeconal oy RPRP To be appointed by. the | Adjudeting Authority. Boscd of directors ete suspended with the appointment af IR Consent of Commitee of creditors in case of resolution process Approval Tom wajoriy of We editors is requires. “Approval of resohton plan requir ‘ote of rot less than Sixty-Six percent of voting share of the rancal ‘editors payments - to be read from top to Bottom in ‘the order of priorities Secured wets (anja to certain requirements) "Expenses in Liquidation andor sdminieration ‘The petioning crete fees ia winding up context, Outstanding employee Unsecured erditos Contbutris (shareholders) secured creditors that hold = cleclating security inteest| may ved to subogate their security to oustanding employee entitlement secured creditors will Take thet Jmerest er any_ outstanding employment eailements ave been pd Tsolveney com workmen dies for 24 ‘months Secared creditors Employees far receding 12 months Unsecured ereiors State dues or sectred creditors for ny ameunt npaid ny remaining debe & doe ref shareholders guiy holder ‘Groat Border Tasotveney Corporations Act and the Crome Border Act contain mechanisms to address croseborder insolvency Teaiows 254 and 255 of THC conan ‘deals of cross border insolvency in Tria I gives power to the thatthe CCenal Government can make any sgreements withthe foreign court ‘art with th inslvency proceedings UNCITRAL Model Law on Cross Border Tnsolveney bie been recommended but” uot yet beet adopted ‘Group Tasalveney Contacied by way oF provisions callsted in Corporations Act, 2001, To Legisation ov Regulons Peer Reviewed: VOLUME: 9, ISSUE: 7(9), JULY: 2020 Page 156 of 261\OTL/ IwreenationnJouenat or MucrioiscieuinaryE pucarionat Researcit ‘i YSSN:2277-7881; Inracr Factor :6.514(2020); IC Vawe5.16; ISI Vawe:2.286 Insolvency Framework in Germany ‘The purpose of German insolvency proceedings isto jointly satisfy the editors by utilizing the assels and distributing the proceeds, or by deviating fram an ingelveney plan, in particular to preserve the company. The honest deblor is given the opportunity to free himself trom his ‘remaining liabilities. The German Insolvency regime i regulated by the Germany Insolveney Code (“TnS0"), It is centralised on federal level. Thus, the 16 single states of Germany do not ve their own applicable insolvency law. Insalvencies in Germany ate mainly governed by the Insolvency Code (“Code”) which was enacted on S" October 1994 which applies tall regardless ‘Comparative Chart Tle Germany — Insolvency Code | Insolvency and Bankruptey Code, tus") 2016 “Aajadicning or the insolvensy pseengs he | National Company Taw —Tbnal ‘Authorities isuiet cour, in the distct of | (Adjudiatiag Authority) and Appeals ‘which regional court fas its seat, | are file before National Company ib exclusively responsible as the | Law Appeite Telunal (Appeliate Bankruptcy court forthe dtc of | Authority, {his eginal cour The appeal agin the order of NCLT Tae sole jurisdiction is the | may be dled st NCLAT. insolvency cour in whose disc the debtor has his general place of jurisdiction. If the focus of an Independent ceonomic activity of the debtor iat a different location, ‘hen only the iasolveny court in whose” ditict this lostion ie Tocated is responsible, Ir more thin ‘ne cour hs jrisditon the cour {hat frst applied for akroptey proceedings excludes the fhe Appointments of |» Fon Tnsolveney | » Corporate Tolvensy Revoiion Insolvency Professionals |" Proceulings - Preliminary | Drowess- Interim” Resohution Incase af resolution and | insolvency Adminisrator | rofesional followed by liguidntion process followed by Final Insolvency | Resolution Professional ‘Adminstrator = Fast Track Insolvency Retsation ‘+ Insoiveney Plan Proceedings: | "Process interim Resolution Aiminiirator Professional followed by = Sei Administration; | Resolution Profesional Castdien + Liqukstion- Liguidetor + Ligudstion —Lignidaor — |S Voluntary iguidation + Voluntary Liquidation: | Liguudator Liquidator Taitation of revofaton | Debio company TaslTor eedion | Faancal —Credior Operational process Ceetor or Corpocat Debtor ise Possession of the |» Formal Tnsaiveney | solvency Professional as IRP RP, To invoivent” company's |" Proceedings- Insolvency | be appointed by the Adhudcating awets ian ease of | Adminisrator Authority. Board of drecors gels ‘esolution process ‘+ Insoiveney Plan Proceedings: | suspended with the appoinimeat of Re www.ijmer.in Peer Reviewed: VOLUME: 9, ISSUE: 7(9), JULY: 2020 Page 157 of 261@® \ EL) eremnariona:Jounnat oF MucritscipuinanvEoucarionat Research * 1S8N:2277-788); Ipacr Facron:6.514(2020}; IC Vawe5.16; ISI Vaue:2.286 Tisolveney Adminisbao Seif Administration- Debtor Consent of Commitee of | Approval of the plan rogues | Apwoval of rsohiion plan requires creditors incase of | mjrty in each group of ceitore | vote of not es than Sixty Six percent Fesolution process slong withthe sim ofthe clase | of voting shure’ of the Ahaacial {approving the plan exceeds half of | rediters, the sum of all aims ofthe ving esitersin tha group Priortia of the | - Creditors — with sighs of | - Tasolveney com payments - t0 be rend | seyaration workmen des for 24 from top to bottom in | - Secured Creditors months ‘the order of priorities Estate Creditors = Secured reitos| Insolveny Creditors + Employees fr preceding 12 mons ity Holders 2 Unsecied eeions 1 state dues secured srettors for any smount ‘unpaid = any remaining dete & dice = Pref shareholders 2 Equity bolder ‘Grows Border Insoivency | Tie provisions of Tateatoml | Soaions 234 and 255 of THC contin Insolvency. Law along with | dei of cose border insolvency tm European’ Insolvency Regulation | India, It gives power to the thal the set the les for croseborder | Cental Government can. make sty insolvencies, im which the debtor | agreements with the frcign county t> Ine ils conte of mai intrest in | start with the insolvency proceedings fone of the Member States of the EU) LUNCITRAL Model Law on Cross Border Insolvency hat been (CHTRAL Mods! Law on Crost- | recommended tat not "yet bee order Insolvency not adopted. | adopted “Group Tasolveasy | Germany fas group insolvency] In Indi, the Code slen show group framework systematic fiamework for giaup | insolvency, however, the cours are ineovencies trying to fl in this lacuna through judicial pronouncements. Group mene ca beady other Substantive Consolidation Insolvency Framework in Singapore Singapore's system of insolvency laws comprises procedures for liquidation as well as rehabilitative debt restructuring procedures. The mein types of proceedings within the later category are judicial management and schemes of arrangement. The key statute governing insolvency and corporate rescue mechanisms in Singapore is Chapter $0 of the Companies Act, 1967", Parliament pasted significant amendments to various insolveney and debt esirucuring provisions in the Companies Actin 2017 and those have come ino fore with effect from 23 May 201 * npsisoaye gov sg/ACLCOAI967 www.ijmer.in Peer Reviewed: VOLUME: 9, ISSUE: 7(9), JULY: 2020 Page 158 of 261@) IwrernationaLJournat or MuttioisctpuinaryEpucaTionat RESEARCH ISSN:2277-7881; Iwract Factor :6.514(2020); IC Vawe:5.16; ISI Vawe:2.286 ‘OMPARATIVE HIART - SINGAPORE AND INDIA Comparative Chart ‘Singapore's totem of Insolvency Laws imolvency and Bankrapley Code, 2016 Taw governing Insolvency ‘Chapter 50 of Companion Aa cauenly governs Insolvency In Singapore insolvency ad Hanikraisy Code 2016 ase) Aajaaiening Authority “The Singapore cours Tave algae erin judges with the requisite expertise as docked insolvency ges to hear aplication relating to solvency and resbucturing incuing when the mater is urgnt ‘aiooal_Company Caw —Taanal QSCLT) is the Agjsieting Authority ‘The Appellate Authoriy ie. National Company Law Applite Tribunal exctany Tipe Theres Tadic! Mimagemeni Schemes of Amungerent, Compulsory" Ligaidstion and Recevershp “Thr sytem of Judicial Management simile to the Corpvate lasaivency Process followed in ind, Thee Compote Toler, ‘Volum’ Liquidation and Ligudation Who can Wigger Tudicial Managemont. The COmpaRY ts directors ons eels ‘Schemes: Company prepares sample ‘eberwe ard nates a plications out fora mesing oF the eedtors Compuliry Liguidation: Crees, ‘he company and judicial manage: Receivership: A sevured creditor sppoints receiver in cirsumstances ‘whore a company isalscady insolvent Tine THC, the debor emeaion he editors (Seancal or operational) can ‘rigger incolvency ‘Management Control proceeding Judicial Management — Toda Manager (officer of the cour takes cover running of company and management is displaced Creiors ‘may establish committee 19 monitor the proces. Schemes: Management retains contol ‘otbriness whe retracting, Compulory Liguidaion: Ligudate oated by creer, sppoated by drt bas responsibilty to wind Sp Ms of company Recehvership: Receiver coatols ‘uoing of busines. Tasolvency Profesional as IRPRP. To be appointed by the Adjudicating Authority. Hoard of rectors gots suspended with he appointment of IP Bole_of Tasolvensy Tica Managemiont Prete Tusiness of debtor as going concern Present rescue pl to eretors, takes into casedy all propery and mansge ‘company's aire according 9 plan Schemes: No equremen ofan IF Compulsory Ligation: Collect, sect and creditors lai, Carry on the proceedings Pat ier THC, the Tnoivensy Profesional Js known athe oficer ofthe court and plays the role of taking. over the Corporate Debtor, keeping 8 «going concer, managing claims, holding freditr meetngs, prepating the Information Memeranm es. On company undepong lguidaton, the 1 has tad over the company 0 the Peer Reviewed: VOLUME: 9, ISSUE: 7(9), JULY: 2020 Page 159 of 261ISSN:2277-7881; Iweact Factor IwrernationaLJournat or MuttioisctpuinaryEpucaTionat RESEARCH {514(2020); IC Vauwe:5.16; ISI Vawe:2.286 essnen, adjuicate dats Topol against company realize company’s sets and dsbute proceed in ordee of sanstory piri. Receivership: Take conta of all most oF company’s assets. Ligadator ts to wai UnGl receiver has completed his tas, Tiguiaior dial Management Roomate aad insolvency is wagered. Schemes: No some morstorism wile Scheme is being proposed Compulsory Liquidation: Post ‘winding up oedr, automate say on proceedings agninst company unless ecevership. No moratorium at all ‘You as po Seaton Priorities of the payments tobe cead From top to bottom in the order of priorities = Secursd credtrs have priory cverall fbr cain + Claims of creditors sevred by joatng, charge rank behind liquidators fees and expenses and referential elses +The oneal order of payment a 2. Chains secured by fixed charges Conte and expenses of winding up. Employees remuneration and ‘tes payments due employers ‘Al taxerusessed before date of ‘commencement of sinding Up oF sseested “at any time before Sxpiation of time Bred. for ‘roving of debt 4. Claims sscured by a Hosting charge 5. Unsecured eer. ‘Any surplus to company/sharcholdrs workmen die for 24 months Secured eros Employees for preceding 12 months Unsecured creitore State dues o secured sreditors for any amous ny temaning debe & shies Pref sharcholders Equity holders Cros Border Singapore adopted the UNCITRAT imalel of Crost Border lasclveney Tw trough the amended Compenie Act 2017 aad is enshrined tthe provisions Section 354A, 3543 and ES4C ofthe Compasies Ac Setions D0 aad DF of THC conte tale of eros border inclveney in India, I giver power to the tat the Cental Goverameat. can make ay sgreements with the foreign counry to Ht with he inslvency proceedings ‘Conclusion: Indian Insolvency & Bankruptcy law is a progressive law and the main emphasis is on its resolution process, One of the major difference compared tothe US laws is that US laws sipaate 2 “Debior in Possession” approach (management remains in control on running the company) ‘where as Other countries & Indian laws envisage the management of the company through Peer Reviewed: VOLUME: 9, ISSUE: 7(9), JULY: 2020 Page 160 of 261(@ J) nreanavionaJounat or MuciotsciptinanyEoucarionat Rescanci ‘i YSSN:2277-7881; Impact Factor 6.514(2020); IC Vawe5.16; ISI Vawe:2.286 Insolvency professional, Although both the situations have their own merits, for example, US laws Delieve that the management ofthe company is best suited for running the company for @ quick reorganisation plan rather than a new person who will have own learning curve as well cost, however UK & Indian laws envisage thatthe company can best be run by Insolvency Professional over the previous management Al the laws look for a resolution plan on going concem basis over liquidation, Insolvency regulator IBBI is proactively addressing the emerging situations which is remarkable, IBC has brought a culture change in corporate india, but i isa joumey which has only just started. A Bird’s eye views on cross country comparison: S| Del dia] UK US “Australia ] Germany] Singapore N 1 [tae TOK Cape | Taalrapcy | Geman | Caper 50 governin | 2015 | tosolvency | 11 oF US | Act, 1966, | Insolvency | of the : fa, 1986 | Bankrupt | the Code(ins0) | Companies Tesalven ey Code | Corporations Act 1967 sy ‘Ac, 2001 and Asualan Securities and Investments Commission ‘Ace 200 T_| Whe can | Creinns | Creitor, | Debor —) Creditors, | Debior Company art store Compan | Directors or | company or | its directors proceeds | Corporat | Holders ot | y Detsor creditors | or its te Debtor | qualifing ‘editors floating charges carey 3] Marstor Ya] Yes Yee ve Yer E_| Manage | Boal of | Tasolensy | Manage | Rocsver ond’ | Detaor im | Julie ment | decors | Provttionse | ment | adminisrator | case of ssif | Manager Control | are sat daly | continues amisiseatio | (oftcer of ftepeade | epratoas Debtor nels Destor | the our) wth | remains wih | in takes “over the appt | thediectrs | Possessio running of of 2 OP) company spproach | Approve] Approve] By ample [by Approval | By majorly | By majorly rear | dby CoC | majority in | majrty | fom majority | ofereditors | ofezeditor Resolute | by 66% | value of | and 23 of he onPlan | vies | creditors | in creditors “is amount | required seoaly voting % | Tasohen | Whowver | Baw by [Horne by | Whoner [Hora by yy inter | Debtor estar | intintes the | debtor Proceedi | the process ng Costs | process www.ijmer.in Peer Reviewed: VOLUME: 9, ISSUE: 7(9), JULY: 2020 Page 161 of 261IvrernationatJourwat or MuctioisctpuinaryEpucaTiona RESEARCH ISSN:2277-7881; Iwract Factor :6.514(2020); IC Vawe'5.16; ISI Vawe:2.286 7] Grow | Seat] msde EU] UNCITR | Ausials aw] UNCITRAL | Sinapore Border | 235 of | EU AL | adopted | Model law is | adopted the Ingolven | the Code, | solvency | model | UNCITRAL | not adapted, | UNCITRAL Y UNCITR | Regution, | law tas | modeliaw | own “set of | model of AL not | Outside BU - | substan res are | Cross ye uNcITRAL | ally been fomplied | Border dopted | Model Law” | adopted Insolvency Law www.ijmer.in Peer Reviewed: VOLUME: 9, ISSUE: 7(9), JULY: 2020 Page 162 of 261