NCLT – NEW REGULATOR TO OVERCOME PRESENT SHORTCOMINGS Avimukt Dar 27 May 2016 ASSOCHAM – NATIONAL SUMMIT MERGERS AND ACQUISITIONS 1

OVERVIEW  NCLT – An Introduction  Constitution of NCLT and NCLAT  Consolidation  Advantages of Consolidation  Powers of NCLT  Simplified M&A Process  Amalgamation – Meeting of Creditors  Insolvency and Bankruptcy Code 2

NCLT – AN INTRODUCTION  First initiated under the Companies (Second Amendment) Act, 2002 to replace the Company Law Board and Board for Industrial and Financial Reconstruction.  Based on recommendations of Justice Eradi Committee on Law Relating to Insolvency and Winding up of Companies.  Establishment of a single forum, which is dedicated to corporate matters, is a welcome move, and removes the problem of multiple regulators.  Principal bench at New Delhi. 3

CONSTITUTION OF NCLT AND NCLAT  Companies Act, 2013 paved way for constitution of NCLT and NCLAT – Section 407 and 410. However, it has not been set up yet.  Members: President + Technical and Judicial members to be appointed by the Central Government.  Technical Member: Must have special knowledge and experience, of not less than twenty-five years, in law, industrial finance, industrial management, investment, accountancy, labour matters etc.  Judicial Member: A person who is or has been a Judge of a High Court or is a Judicial Member of the Tribunal for five years. 4

CONSOLIDATION  NCLT to replace:  Company Law Board  Board of Industrial and Financial Reconstruction  Consolidate jurisdiction of judicial and quasi judicial tribunals NCLT CLBBIFR High Court 5

ADVANTAGES OF CONSOLIDATION Faster Disposal: Appeals will be streamlined: Appeals from NCLT to go to NCLAT Appeal to Supreme Court from NCLAT only on question of law Endeavors to dispose of proceedings in 3 months Avoids Multiplicity of litigation Technical members will add much needed expert advice in matters Only company law and related matters to be handled All professionals under one roof 6

POWERS OF NCLT  Powers of Company Law Board, particularly, in the case of oppression and mismanagement.  Powers of Board for Industrial and Financial Reconstruction.  Power of High Court in mergers, demergers, amalgamation and winding up.  Resolution of insolvency, bankruptcy and liquidation.  Class Actions  Corporate Debt/Capital Restructuring. 7

SIMPLIFIED M&A PROCESS  2013 Act has simplified the process of merger, de-merger, restructuring that requires approval of NCLT.  Broadly, this can be summarized as follows:  Process  Transparency  Time line  NCLT would be one specified body dealing with cases as opposed to multiple courts and registries in case of companies falling under the jurisdiction of different High Courts 8

AMALGAMATION - MEETING OF CREDITORS  The NCLT is empowered to dispense with meetings of creditors if at least 90% of the creditors in value agree and confirm this by affidavit.  This reduces discrepancy in practice followed by different benches while granting their approval on the basis of NOC’s obtained. 9

INSOLVENCY AND BANKRUPTCY CODE  The NCLT will be the adjudicating authority for insolvency resolution and liquidation of Companies and Limited Liability Partnerships.  When a financial default occurs, either the borrower or the lender can approach the NCLT for initiating the resolution process.  Corporate insolvency process shall be completed within 180 days of admission of application by NCLT.  Any person aggrieved by order of NCLT can appeal within 30 days to NCLAT. Further appeal to Supreme Court. 10

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