Insolvency and Bankruptcy

Code-2016

*BY:
*CA VAIBHAV JAIN
*FCA, ACS, LL.B, DISA
*Phone: +91 9711310004
*E-mail id:
vaibhavjain@inmacs.com
 Key Features

Applicable to both corporate and non-corporate persons;




Allow creditors, whether secured; unsecured; financial or operational; domestic or
international to initiate a resolution processes thereby aiming for an early detection
of the fraud;


Establishes time-bound moratorium on acceleration and enforcement of debts
against the company;


The resolution professionals can replace the existing management during insolvency
proceedings;


Provides for time-bound viability assessment mechanisms, liquidation processes and
distribution waterfalls;
 Applicability, Scope & Structure
Applicability STRUCTURE

All kinds of: In entirety, the Code has 255 sections which are divided
into 5 Parts as given below
Corporate Enterprises;
-

Limited Liability Partnerships;

-
Part III
Part II
Part I Insolvency
Partnership Firms; and
-
Insolvency
Preliminary Resolution and
Resolution and
Individuals.
-
(Definitions) Bankruptcy for
Liquidation for
Corporate Persons individuals and
Partnership Firms
Scope
Part IV Part V Schedules
Insolvency;
- Regulation of Miscellaneous (11 Schedules)
Insolvency (enables Provides for
Liquidation;
-
Professionals, amendments in amendments to be
Voluntary Liquidation (solvent
- Agencies and other statues such as carried out in other
Information Companies Act statues
insolvency); and
Utilities 2013)
Bankruptcy
-
 FRAMEWORK OF THE CODE

Regulator Adjudicator

Insolvency and Bankruptcy Board of National Company Debt Recovery

India (IBBI) Law Tribunal Tribunal

Corporate Non-Corporate
Insolvency Professional Agencies;

Entities Entities
Insolvency Professionals; and


Information Utilities

Companies/LLPs Individuals and
Partnership Firms
 Corporate Insolvency Resolution Process
Admission of application and appointment of Interim Resolution Professional

Collation of claims and constitution of committee of creditors by Interim Resolution

Professional

Appointment of Resolution Professional in the creditors meeting held within 7 days of

constitution of committee of creditors

Resolution Professional to prepare Information Memorandum

Resolution Applicant to prepare (on the basis of Information Memorandum) and submit resolution
plan to Resolution Professional for examination & further submission for approval of committee of
creditor
Resolution Resolution
plan approved plan rejected
by committee by committee

Liquidation
NCLT NCLT
process starts
approves rejects
plan plan
 Interim Resolution Professional (“IRP”)
NCLT shall appoint an IRP within fourteen days from the insolvency
commencement date.

Role of IRP
From the date of appointment of the IRP-
the management of the affairs of the corporate debtor shall vest in the IRP;

the powers of the board of directors or the partners of the corporate debtor, shall stand suspended and be
exercised by the IRP;
the officers and managers of the corporate debtor shall report to the IRP and provide access to documents of the
corporate debtor as may be required by IRP

the financial institutions maintaining accounts of the corporate debtor shall act on the instructions of IRP in
relation to such accounts and furnish all information relating to the corporate debtor available with them to the
interim resolution professional.

The interim resolution professional shall make every endeavor to protect and preserve the
value of the property of the corporate debtor and manage the operations of the corporate
debtor as a going concern.
 Role of IRP/RP in Insolvency Resolution Process for Corporate Persons
Public IRP to appoint 2 registered Submission of Proof of Verification of Claims
Announcement by valuers within 7 days of his Claims by creditors, by IRP within 7 days of
IRP within 3 days of appointment to determine workmen and employees to receipt
his appointment in the liquidation value of IRP in FORMs B,C,D,E as
FORM A. corporate debtor may be applicable. Constitution of
Committee of Creditors
(“COC”)
RP shall present all Resolution RP on instruction of COC may Where corporate debtor has no
plans that meet requirements of apply for Extension of CIRP financial debt, COC shall consist
Code to COC for its consideration period before NCLT. of-
•
18 largest operational creditors
by value
IRP/RP shall submit •
1 workmen representative
Information Memorandum in •
1 employee representative
electronic form to each member
of COC IRP to file Report certifying
IRP to convene first constitution of COC to NCLT
IRP shall provide the
meeting of COC within 7 within 30 days of his
Liquidation value to COC in
days of filing the report appointment
electronic form
 Fast Track Corporate Insolvency Resolution


Application for fast track insolvency resolution may be made in respect of corporate debtor:

–With income/ assets below specified threshold;

–Having notified class of creditors or amount of debt;
–Falling under the category;
–As may be notified by the Central Government


Fast Track Insolvency process to be completed within 90 days from commencement date


Provision for 1 extension only, for a period of 45 days


Process may be initiated by a creditor or corporate debtor by furnishing proof of default or any
other specified details


Process largely the same as that for regular insolvency resolution
 Voluntary Liquidation
May be initiated by the corporate debtor even without existence of default



Special resolution of members needs to be passed within 4 weeks of declaration
by directors

➢
Resolution to be approved by creditors representing 2/3rd value of debt within
7 days of the members resolution


RoC and the Board to be notified of the decision to voluntarily liquidate within 7
days of passing such resolution and subsequent approval by the creditors

➢
Liquidator to make application to NCLT for dissolution

➢
NCLT to pass an order dissolving the corporate debtor from the date of such
order ,Copy of such order to be forwarded to the Roc within 14 days from the
date of the order .
THANK YOU!

CA VAIBHAV JAIN
INMACS Management Services Limited
32, Global Business Square, Sector 44, Gurgaon, Haryana
909, Chiranjiv Tower, 43, Nehru Place, New Delhi - 110019
Phone: +91 9711310004