The corporate insolvency resolution process, 2016, aims to stabilize the interests of all stakeholders by altering and establishing the laws associated with the reorganization and insolvency of corporate entities, individuals, and partnership firms in a time-bound approach.
Now, what is the corporate insolvency resolution process? In light of the losses faced by the creditors, as a consequence of the non-payment of debt in due course of time because of the non-existence of a legally binding process, the parliament announced the Insolvency and Bankruptcy Bill in 2015, which was passed in 2016. The losses suffered by the creditors were, by extension affecting the financial stability of the creditors and the economy as a whole too.
The Indian Insolvency & Bankruptcy Code offers for legally binding and viable modus operandi for the insolvency process of corporates, partnerships, and even individuals. This article is specifically about the Corporate Insolvency Resolution Process. Section 6 under Chapter II of The Code defines corporate insolvency resolution process as a process originated by a financial creditor, operational debtor, or the corporate debtor itself when payment by the corporate debtor has defaulted.
To know why the corporate insolvency resolution process is essential, and to know who can initiate the process is also important. So, if a debtor becomes bankrupt and commits a default in payment, a financial creditor, an operational creditor, or the corporate debtor may approach the Adjudicating Authority, National Company Law Tribunal for insolvency resolution of corporate persons to hand-over an application for initiating corporate insolvency resolution process against the defaulter. The process of initiating proceedings and other practices to be followed vary for each category of the creditor.
For financial creditors, who are allottees of a real estate project, an application to initiate a corporate insolvency resolution process against a corporate debtor will have to be filed mutually by not less than ten percent of the total number of the respective project's allottees or not less than one hundred of such allottees of the project, whichever is lesser.
Such creditors shall have to make an application along with a prescribed fee and also have to provide:
• Proof of the debt default or record of default which is noted with an information utility (a person or entity eligible to act as a source of legal information relating to any debt/claim, as submitted by a financial or operational creditor, and confirmed and authenticated by the other parties to the debt/claims, such as National E-Governance Services Limited)
• Name of the resolution professional which the creditors intend to be the provisional resolution professional
• other information as needed by the Insolvency and Bankruptcy Board of India (IBBI).
NCLT intend to, within 14 days of the acceptance of the application, establish the existence of default through accessing the records of an information utility or as per other proof provided by the financial creditor. If the same is not done within the time limit, the Tribunal shall record its reasons for the same through a written application
If the Tribunal has determined the default, is content with the application made and sees that there are no pending disciplinary proceedings against the proposed resolution professional, it may, by its order, admit the application. If the Adjudicating Authority finds disputes in any of the above three components, it will, before rejecting the application, give seven days to the applicant to resolve that mistake. If admitted, NCLT will convey the order to the financial creditor and the corporate debtor, and the resolution process shall commence from the date of admission of the application.
A Pre-Packaged Insolvency India is a way of resolving the difficulties of creditors and owners of a troubled business. Under a pre-pack resolution, creditors and owners decide to sell the business to an interested buyer before getting to the court to approve the agreement. The buyer may be a third party, or someone associated with the business. The pre-pack insolvency resolution process (PIRP) is in contrast to the corporate insolvency resolution process (CIRP) that has been used under the IBC to sell or dispose of distressed businesses till now. Under CIRP, once a creditor moves to court, a resolution professional chosen by the court takes charge of the business and then draws up and executes a resolution plan. The Pre-Packaged Insolvency India option has been established to help micro, small and medium enterprises (MSMEs) who have been hit hard by the pandemic.
TRC Corporate Consulting continuously strives to give each client individual attention and personalized services to cater to their specific requirements. So, whether it's the liquidation process, insolvency resolution process, management task, risk mitigation or financial advisory services, TRC Corporate Consulting's services have demonstrated to be highly supportive over the years. With years of market experience blended with modern tools and techniques, the professional consultants at TRC corporate consulting also offer additional services that involve 29A Verification, Claim Collection, FAR Management, and much more.
TRC Corporate Consulting's competent team of insolvency professionals use an analysis and evaluation method with impartial understanding before taking any further steps in the insolvency resolution procedure and keep you well-informed and updated on the procedures.
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