Insolvency & Bankruptcy Code, 2016 AMITA DESAI & CO Insolvency & Bankruptcy Code, 2016 Presented by – Akshay Kallil Chief Editor- Amita Desai

AMITA DESAI & CO Introduction: The Insolvency & Bankruptcy Code (the Code) received the assent of the President on 28th May 2016 The Code has been enacted especially to protect the interest of domestic banking industry for recovering the bad loans and managing financial stress efficiently. This Code is consolidated and amended to reorganize and insolvency resolution of Corporate Person, Partnership firms and Individuals in a time bound manner.

AMITA DESAI & CO Introduction: The Code encourages cross border financing and unsecured lending to domestic borrowers and thereby reducing pressure of indebtness in India. The main aim of the Code is to bring India financially par with other developed nations of the world.

Source: Doing business report, 2016 AMITA DESAI & CO Ranking by World Bank: Source: Doing business report, 2016

Source: Doing business report, 2016 AMITA DESAI & CO Recovery Rates: Source: Doing business report, 2016

Source: Doing business report, 2016 AMITA DESAI & CO Recovery Period: Source: Doing business report, 2016

AMITA DESAI & CO Objectives: To bring under on roof various laws in relation to insolvency, bankruptcy, liquidation of all person including Companies, LLPs, Partnership firms, Individuals and such other Body Corporate specified by Central Government. Initiating bankruptcy or liquidation shall maximize the value of assets

AMITA DESAI & CO Objectives: Creating a establishment for eliminating inefficiencies involved in the bankruptcy process by introducing Insolvency and Bankruptcy Board of India (IBBI), Insolvency Resolution Professional Agencies (IPAs), Insolvency Professionals (IPs), Information Utilities (IUs).

What gets Amended? The Indian Partnership Act, 1932 AMITA DESAI & CO What gets Amended? The Indian Partnership Act, 1932 The Central Excise Act, 1944 The Income-tax Act, 1961 The Customs Act, 1962 The RDDBFI Act, 1993 The Finance Act, 1994 The SARFAESI Act, 2002 The Sick Industrial Companies (Special Provisions) Repeal Act, 2003 The Payment And Settlement Systems Act, 2007 The LLP Act, 2008 The Companies Act, 2013

Adjudicating Authorities: AMITA DESAI & CO Adjudicating Authorities: Entities Adjudicating Authority Individuals Partnership Firms Debt Recovery Tribunal Companies Limited Liability Partnership National Company Law Tribunal (NCLT)

Applicable to ? Companies incorporated as per Companies Act, 2013; AMITA DESAI & CO Applicable to ? The Code shall apply to: Companies incorporated as per Companies Act, 2013; Companies governed by any special Act; Limited Liability Partnership (LLPs); Any body corporate, incorporated under any Act for the time being in force, as the Central Government may specify; Partnership firms and individuals (Not Notified)

Operational Creditors Corporate Applicant Insolvency Commencement Date AMITA DESAI & CO Important Terms: Financial Creditors Operational Creditors Corporate Applicant Insolvency Commencement Date Insolvency Resolution Period

AMITA DESAI & CO Important Terms: Financial Creditors Financial creditors are those who extends financial debt to a corporate debtor or to whom such Financial Debt is legally transferred or assigned to.

Important Terms: Financial Debt Financial Debt means a debt along with interest if any, which is disbursed against the consideration for the Time Value of Money and includes various amount mentioned under Clause (a) to (i) of Section 5(8) of the Code

AMITA DESAI & CO Important Terms: Operational Creditor These are creditors to whom corporate debtor owes operational debt or to whom such debt is legally transferred or assigned.

Important Terms: Operational Debt Operational Debt means a claim in respect of the provision of goods or services including employment or a debt in respect of the repayment of dues arising under any law for the time being in force and payable to Central Government, any State Government or Local Authority.

Important Terms: Corporate Debtor or AMITA DESAI & CO Important Terms: Corporate Applicant : Corporate Applicant includes: Corporate Debtor or Member/ partner of Corporate Debtor who has authorization to make application for Corporate Insolvency Resolution Process An individual who is in charge of managing the operations and resources of Corporate Debtor a person who has control and supervision over the financial affairs of the Corporate Debtor.

AMITA DESAI & CO Important Terms: Insolvency Commencement Date It shall be the date of admission of Application for initiating Corporate Insolvency Resolution Process (CIRP) by Adjudicating Authority.

AMITA DESAI & CO Important Terms: Insolvency Resolution Process period It shall be period of 180 days beginning from the insolvency commencement date and ending on 180th day.

AMITA DESAI & CO Moratorium: The Code stipulates an interim moratorium period which would commence after filing application for fresh insolvency process and shall cease to exist after a period of 180 days from the date of application. Moratorium shall prohibits: Institution of suits Transfer of assets Foreclosure, recovery or enforcement under SARFAESI Recovery of assets

Interim Resolution Professional (IRP) Resolution Professional means an insolvency professional appointed to conduct the Corporate Insolvency Resolution Process and includes Interim Resolution Professional

Tenure of IRP The IRP is appointed by NCLT within 14 days from the Insolvency Commencement Date. The term of the IRP shall not exceed 30 days from the date of his appointment. The Committee of Creditors (CoC) may, at its first meeting, either resolve to appoint the IRP as a Resolution Professional (RP).

Duties of IRP Make public announcement within 3 days of his appointment about initiation of Corporate Insolvency Resolution Process (CIRP) and call for claims from creditors; Manage the operation of the Corporate Debtor as a going concern and protect and preserve the value of property ; Take control and custody of assets over which the Corporate Debtor has ownership Collection of information relating to assets, finances and operations of Corporate Debtor, including information relating to: business operations for the previous 2 years financial and operational payment for previous 2 years list of assets and liabilities as on initiation date

Duties of IRP ( Contn) Receive and collate claims from creditors; Constitute Committee of Creditors in maximum 30 days from his appointment; File report certifying the constitution of Committee of Creditors (CoC) to Adjudicating Authority (AA); Sending Notice and convene 1st meeting of CoC ; Shall submit Information memorandum to each member of the committee in electronic form File information collected with Information Utility;

Custody of Assets of Corporate Debtor: Assets which can be t/o by IRP Assets which cannot be t/o by IRP Assets over which the corporate debtor has ownership rights which may be located in foreign country Assets that may or may not be in the possession of the corporate debtor Tangible assets, whether movable or immovable Intangible assets, including intellectual property Securities including shares held in the subsidiary of the Corporate Debtor, financial institution, insurance policies Assets subject to the determination of ownership by a court or authority. Assets owned by a third party in possession of the Corporate Debtor held under trust or under contractual agreements including bailment Assets of an Indian or foreign subsidiary of Corporate Debtor Such other assets as may be notified by the Central Government in consultation with any financial sector regulator.

Powers of IRP Management of the affairs of the Corporate Debtor is taken over by IRP since his appointment The powers of the Board of Directors or the partners of the Corporate Debtor, as the case may be, are suspended and be exercised by the IRP The officers and managers of the Corporate Debtor shall report to the IRP and co-operate with him/her in providing access to documents and records of the Corporate Debtor The financial institutions maintaining accounts of the Corporate Debtor shall furnish all information relating to the Corporate Debtor available with them to the IRP Take such actions, in the manner and subject to such restrictions, as may be specified by the IBBI including execution of all deeds, receipts and documents for Corporate Debtor .

Powers of IRP (Contn) Access the electronic records of the Corporate Debtor from the Information Utility Access the books of account, records and other relevant documents of Corporate Debtor available with the Government authorities, Statutory Auditors, Accountants and such other persons as may be specified Appoint accountants, legal counsel or such other professionals who may provide specialist advice to the IRP. Such professionals may include turnaround specialists and management experts. Enter into contracts on behalf of the Corporate Debtor or to amend or modify the contracts or transactions which were entered into before the commencement of the CIRP;

Powers of IRP ( Contn) Raise interim finance. However, any interim finance raised by providing security of an encumbered property of the Corporate Debtor will require prior permission of the concerned creditor Issue instructions to personnel of the Corporate Debtor as may be necessary for keeping the Corporate Debtor as a going concern Take all such actions as are necessary to keep the Corporate Debtors as a going concern. IRP shall appoint two (2) registered valuers within seven (7) days of his / her appointment to determine the liquidation value of the Corporate Debtor

Powers of IRP ( Contn) 13. For the management of operations of CD as going concern IRP shall have authority : To appoint accountants, legal or other professionals To enter into contracts on behalf of the CD To raise interim finance provided no security interest is created To issue such instructions to CD’s personnel as may be necessary for keeping the CD as a going concern.

Duties of Resolution Professional (RP): AMITA DESAI & CO Duties of Resolution Professional (RP): Preserve and protect the assets of the corporate debtor and continued business operations of the corporate debtor; Represent and act on the behalf of the corporate debtor with third parties, exercise rights for the benefits of the corporate debtor in judicial, quasi- judicial or arbitration proceedings; Maintain an updated list of claims of creditors; Convene and attend all meetings of the committee of creditors;

Duties of Resolution Professional (RP): AMITA DESAI & CO Duties of Resolution Professional (RP): Present all resolution plans at the meetings of the committee of creditors; Appoint accountants, legal or other professionals in the manner as specified; such other actions as may be specified by the Board

Details to submitted by IRP/RP in IM before 1st CoC meeting: assets and liabilities, as on the insolvency commencement date, classified into appropriate categories for easy identification, with estimated values assigned to each category; the latest annual financial statements; audited financial statements of the corporate debtor for the last two financial years and provisional financial statements for the current financial year made up to a date not earlier than fourteen days from the date of the application; a list of creditors containing the names of creditors, the amounts claimed by them, the amount of their claims admitted and the security interest, if any, in respect of such claims;

Details to submitted byIRP/RP in IM before 1st CoC meeting: (Contn) particulars of a debt due from or to the corporate debtor with respect to related parties; details of guarantees that have been given in relation to the debts of the corporate debtor by other persons, specifying which of the guarantors is a related party; the names and addresses of the members or partners holding at least one per cent stake in the corporate debtor along with the size of stake; details of all material litigation and an ongoing investigation or proceeding initiated by Government and statutory authorities; the number of workers and employees and liabilities of the corporate debtor towards them;

Details to submitted by IRP/RP within 14 days of 1st CoC meeting: the liquidation value; the liquidation value due to operational creditors; and other information, which the resolution professional deems relevant to the committee.

AMITA DESAI & CO Resolution Plan: Resolution plan means a plan proposed by any person for insolvency resolution of the Corporate Debtor as a going concern in accordance with Part II of the Code.

AMITA DESAI & CO Resolution Plan: An Applicant may submit a Resolution Plan to the Resolution Professional(RP) to be prepared on the basis of Information Memorandum (IM).   RP shall present Resolution Plans before the Committee Creditor (CoC) for its approval.

Resolution Plan: Resolution plan to also provide for repayment of the operational creditors in the manner specified by the Board (IBBI) which shall not be less than what they would be paid in the liquidation of the Corporate Debtor. The resolution plan consented to by 75% or more of the financial creditors in value terms is forwarded by the RP for the approval of Adjudicating Authority.

Corporate Insolvency Resolution Process (CIRP) AMITA DESAI & CO Corporate Insolvency Resolution Process (CIRP) Applicability -Minimum amount of default ₹ 1 Lakh -Central Government may provide minimum amount of higher value which shall not be beyond ₹ 1 Crore

Corporate Insolvency Resolution Process (CIRP) AMITA DESAI & CO Corporate Insolvency Resolution Process (CIRP) Who can institute a corporate insolvency resolution process? Financial Creditor Operational Creditor Corporate Debtor

4 . Admit 5. Reject AMITA DESAI & CO Default in Payment of Debt Due 1. Operation Creditor on occurrence of default deliver a demand notice for demanding payment 2. if the operational creditor does not receive payment from the corporate debtor after sending Notice 3. Application to National Company Law Tribunal (NCLT) 14 Days 4 . Admit 5. Reject 4A Moratorium shall begin Corporate Insolvency Resolution Process shall commence 5A. NCLT may grant 7 days extension to rectify the error in application and file the same again.

180 days + 90 days (ext) AMITA DESAI & CO 4B.. NCLT shall appoint Interim Resolution Professional and make Public Announcement 30 days 180 days + 90 days (ext) 4C.Constitute a Committee of Creditors (CoC)and conduct a meeting within 7 days of constitution and finalize the appointment of resolution professional 4D. Acceptance/ Rejection of Resolution Plan by Committee of Creditors with 75% majority 4E. Submit RP to NCLT 4E(1)Accept 4E (2) REJECT 4E(1a) Implementation of resolution plan 4E (2a) Liquidation Process shall commence Contravention of resolution plan

Fast Track Corporate Insolvency Resolution Process: AMITA DESAI & CO Fast Track Corporate Insolvency Resolution Process:

AMITA DESAI & CO Info: MCA vide notification dated 14th June,2017 has enforced Section 55 -58 of IBC, 2016 as well as IBBI (Fast Track Corporate Insolvency Resolution Process) Regulation, 2017 As the name suggests, the time frame for completion of resolution process is 90 days The concept is introduced mainly for Small and Start-up Companies

Application Can be made by: AMITA DESAI & CO Application Can be made by: CORPORATE DEBTOR Start-ups (other than partnership firm) Unlisted Companies (total assets not exceeding Rs 1 Cr) Small Companies

Procedure For Fast Track Corporate Insolvency Resolution Process:

AMITA DESAI & CO Reg/Sec Time Line Particulars X days Selection of Insolvency Professional (IP) out of list of IP registered with IBBI. X+1 days Take consent letter from selected IP to act as IRP. Section 57 X+2 days Financial Creditor/Operational Creditor/ Corporate Debtor himself can file application for initiating FTCIRP. Section 7 (4) and (5) X+2+14 days Or Y day (Fast Track commencement date) Adjudicating authority shall, within 14 days of receipt of the application, ascertain the existence of default. Once satisfied the application shall be admitted. Reg 6 Y+3 days IP shall make a public announcement within 3 days from the date of his appointment. Reg 26 Y+7 days IRP shall within 7 days of his appointment shall appoint one registered valuer to determine the liquidation value of the corporate debtor. Reg 2 (c), Reg 7, Reg 8, Reg 9 Y+10 days Submission of proof of claim to the IRP within 10 days from the appointment of IRP: 1)By Operational Creditor: In Form B; 2)By Financial Creditor: In Form C; 3)By workmen or employees in Form D  and 4)in case of numerous employees in Form E

AMITA DESAI & CO Reg/Sec Time Line Particulars Reg 13 (1) Y+10+7 days The Interim Resolution Professional shall verify every claim as on Fast Track commencement date within 7 days from the last date of receipt of the claim Reg 17 (1) Y+21 days IRP shall after collation of the claims create a committee of creditors within 21 days from the date of his appointment and shall file a report certifying the constitution of committee to the Adjudicating Authority Reg 19 Y+21+7 days Sending Notice of Committee Meeting by IRP to every participants (Committee may reduce the period from 7 days to 24 hrs) Reg 35 (1) (a) Before 1st committee meeting The Resolution Professional(RP) shall prepare Information Memorandum (IM) containing details in Reg 35 (2) [a-i] and submit the same before the first meeting of committee of creditors Reg 17 (4) Y+21+7+7 days Interim Resolution Professional shall  convene 1st meeting of the Committee within 7 days of filing of report certifying the constitution of the committee Reg 24 (7) Within 48 hrs of conclusion of meeting RP shall circulate the minutes of the Meeting to all the participants by electronic means within 48 hrs of the meeting.

AMITA DESAI & CO Reg/Sec Time Line Particulars Reg 34 (3) and 35 (1) (b) Y+35+14 days The RP shall finalize the liquidation value and submit the same to the committee i.e. Reg 35 (2) [j-l ] within 14 days after the 1st meeting of committee Reg 38 (1) Y+35+14+11 days A resolution applicant shall submit the resolution plan to the RP within 30 days before the expiry of maximum period permitted to complete corporate insolvency resolution process. Y+60 days Send notice to the members of the committee for calling of next meeting of committee of creditors Reg 38 (2) Y+60+7 days Meeting of committee shall be convened and the RP will present the resolution plan to the committee for its consideration Reg 38 (4) RP shall submit the resolution plan approved by the committee to the Adjudicating Authority with the following certification: a)      The contents of the resolution plan meet all the requirement of the code; b)      The resolution plan has been approved by the committee. Reg 38 (5) Y+90 days The Adjudicating Authority after being satisfied shall pass order approving the resolution plan

Liquidation Process:

Liquidation Procedure after Resolution Plan is not approved AMITA DESAI & CO Liquidation Procedure after Resolution Plan is not approved TRIGGER EVENT Committee of Creditor do not agree with resolution plan Committee of Creditor decides to liquidate Corporate Debtor contravenes the resolution plan LIQUIDATOR APPOINTMENT NCLT shall appoint the Resolution Professional as the liquidator for the corporate debtor Cont….

LIQUIDATION ESTATE COLLECTION OF CLAIMS AMITA DESAI & CO LIQUIDATION ESTATE Liquidator shall identify the assets of the corporate debtor and form a liquidation estate COLLECTION OF CLAIMS The liquidator shall receive or collect claims from creditors within the period of 30 days of commencement of liquidation process. Cont….

VERIFICATION OF CLAIMS IDENTIFICATION OF ASSETS REALIZED AMITA DESAI & CO VERIFICATION OF CLAIMS Liquidator shall verify the claims of secured creditor and discharge payments IDENTIFICATION OF ASSETS REALIZED Secured creditors shall identify the assets offered against the sum owed to them. Cont….

ADMISSION / REJECTION OF CLAIMS AMITA DESAI & CO ADMISSION / REJECTION OF CLAIMS The liquidator shall communicate his decision of admission or rejection of claims to creditor within 7 days of such admission or rejection of claims REMITTANCE Excess money realized by secured creditors for liquidation from liquidation shall be remitted to liquidator Cont….

DISTRIBUTION OF PROCEEDS BASED ON PRIORITY APPLICATION FOR DISSOLUTION AMITA DESAI & CO DISTRIBUTION OF PROCEEDS BASED ON PRIORITY After making payment to secured creditor, the unsecured debt are to be paid as specified in waterfall effect as mentioned below APPLICATION FOR DISSOLUTION Once all the assets of corporate debtor are realized and proceeds are distributed , the liquidator shall apply for dissolution before NCLT Cont….

ORDER OF NCLT SUBMISSION OF ORDER AMITA DESAI & CO ORDER OF NCLT NCLT shall pass an order dissolving the Corporate Debtor SUBMISSION OF ORDER Copy of order shall be filed with ROC within 7 days from the date of such order

TIMELINE FOR CIRP Filing of Application to NCLT AMITA DESAI & CO TIMELINE FOR CIRP -14 days Filing of Application to NCLT 0 day Admission of Application Declare Moratorium 14 days NCLT to Appoint IRP 17 days Public Announcement 28 days Creditor to submit their Claims IRP to constitute CoC and submit report 44 days Conduct 1st CoC Meeting 51 days 65 days Preparation of Information Memorandum 150 days Submission of Resolution Plan CoC’s approval of resolution plan Application for NCLT Approval 180 days

Who Cannot Initiate CIRP ? AMITA DESAI & CO Who Cannot Initiate CIRP ? Undergoing CIRP Completed CIRP Violated any terms of resolution plan Liquidation order is made WHO CANNOT MAKE APPLICATION TO INITIATE CIRP ?

WATERFALL EFFECT AMITA DESAI & CO Wages + Unpaid dues to employees Insolvency Resolution Cost + Liquidation Cost Workmen’s dues + secured creditors Wages + Unpaid dues to employees WATERFALL EFFECT Unsecured Creditors Central Govt + State Govt.+ Secured creditors (remaining Amt. In case of liquidation the assets of the corporate debtor shall be sold and the proceeds shall be distributed amongst the creditors in the following order of priority. Any remaining dues Preference Shareholders Equity Shareholders/ Partners

Liquidation Estate: Includes Excludes AMITA DESAI & CO Assets where corporate debtor has ownership rights; Assets which may/ may not be in the possession of corporate debtor including encumbered assets; Tangible assets; Intangible assets; Assets subject to determination of ownership by court; Assets recovered through proceedings for avoidance of transaction; Assets of corporate debtor in respect of which secured creditor has relinquished security interest; Any property vested in corporate debtor at insolvency commencement date; All realization proceeds of liquidation. Excludes Assets in possession of corporate debtor but owned by third party; Assets in security collateral held by financial service provider; Personal assets of shareholders or partners of corporate debtor; Assets of subsidiary (Indian/ Foreign) of the corporate debtor; Any other assets as may be specified by IBBI.

AMITA DESAI & CO Voluntary Winding Up: The provisions of voluntary winding up provided under the Companies Act, 2013 presently stands omitted due to notification of Section 255 of the Code. However , these provisions now falls between the ambit of Section 59 of the Code which deals with the voluntary liquidation of corporate persons. Since the provisions for voluntary winding up is now notified in the Code wef 01st April, 2017 IBC will be applicable in case of non defaulting company

AMITA DESAI & CO Voluntary Winding Up: The Tribunal shall not have the authority to entertain applications with respect to voluntary winding up till the notification of provisions of voluntary winding up under the Code. Therefore, till the time such provisions are notified and corresponding Rules will be prescribed by Central Government, the procedure laid down under the Companies (Court) Rules, 1959 (“Court Rules”), being the rules framed by Hon’ble Supreme Court, will be applicable and consequently to the extent Court Rules refers to the provisions of Companies Act, 1956, such provisions shall be applicable to the applications of voluntary winding up. However wef 01st April, 2017 section 59 has been notified

AMITA DESAI & CO Offences & Penalties: Penalties prescribed for officer of corporate debtor: Concealment of property Undertaking transaction defrauding creditors Misconduct in CIRP Falsification of books of corporate debtor False representation of creditors Contravention of moratorium of resolution plan Non-disclosure of dispute on repayment of debt by operational debtor. IMPRISONMENT 1 year to 5 years MONETARY PENALTY 1 Lakh to 1 Crore BOTH OR OR

AMITA DESAI & CO Offences & Penalties: Insolvency Professionals contravenes the provisions of the code: IMPRISONMENT Extend to 6 months MONETARY PENALTY 1 lakh to 5 lakhs BOTH OR OR

Insolvency and Bankruptcy Board of India (IBBI) AMITA DESAI & CO Insolvency and Bankruptcy Board of India (IBBI) IBBI shall be a body corporate, having perpetual succession and a common seal. The IBBI is the regulator for overseeing insolvency proceedings and entities like insolvency professional agencies, insolvency professionals and information utilities in India

AMITA DESAI & CO A Chairperson 3 members 1 member 5 other members Constitution of IBBI (Office at New Delhi) Appointed by Central Government A Chairperson 3 members who are officers of central government not below the rank of Jt Secretary One of each shall represent MOF, MCA, MOL 1 member Nominated by RBI 5 other members Nominated by Central Govt (3/5 shall be whole-time member)

AMITA DESAI & CO Power of IBBI: The Board shall have the same powers as are vested in civil court under Code of Civil Procedure 1908: the discovery and production of books of account and other documents, at such place and such time as may be specified by the Board; summoning and enforcing the attendance of persons and examining them on oath; inspection of any books, registers and other documents of any person at any place; issuing of commissions for the examination of witnesses or documents.

Insolvency Professional Agency (IPA) : AMITA DESAI & CO Insolvency Professional Agency (IPA) : IPA is a body that would admit insolvency professionals as members and develop a code of conduct and promote transparency and best practice in governance.

Eligibility Criteria for Registration as a IPA: AMITA DESAI & CO Eligibility Criteria for Registration as a IPA: Company registered under Section 8 of the Companies Act, 2013 and Its sole object is to carry on function as a IPA It has Bye-Laws and governance Structure Its minimum net worth of 10 Crore rupees Its paid up share capital of 5 Crore rupees It is not under the control of person(s) resident outside India; not more than 49% of its share capital is held, directly or indirectly, by persons resident outside India; not a subsidiary of a body corporate through more than one layer; itself, its promoters, its directors and persons holding more than 10% of its share capital are fit and proper persons;

Registration as Insolvency Professional Agency (IPA) : AMITA DESAI & CO Registration as Insolvency Professional Agency (IPA) : Application 7 Acknowledged by IBBI 15 Accept Reject Issue Certificate Opportunity of being heard

Functions of IPA : Grant membership to person to function as IP’s AMITA DESAI & CO Functions of IPA : Grant membership to person to function as IP’s Lay down standard for professional conduct for its members Monitor performance of its members Safeguard rights, privileges and interests of IP’s Suspend or cancel membership of IP’s Redress grievances of consumers against IP’s Publish information of its functions, IP’s performance etc

Insolvency Professional: AMITA DESAI & CO Insolvency Professional: These are licensed professional appointed by insolvency professional agency who would take on the roles of Resolution Professional or Liquidator/ Bankruptcy Trustee in an Insolvency Resolution Process.

National Insolvency Examination Limited Insolvency Examination AMITA DESAI & CO Examinations: National Insolvency Examination Limited Insolvency Examination

Eligibility for Registration as insolvency Professional: AMITA DESAI & CO Eligibility for Registration as insolvency Professional: Passing National Insolvency Examination OR Passing Limited Insolvency Examination 10 years of post membership experience as a: Chartered Accountant Company Secretary Cost Accountant Advocates 15 years post qualification managerial experience after receiving Bachelor Degree in Law OR

PROCEDURE FOR REGISTRATION AS INSOLVENCY PROFESSIONAL AMITA DESAI & CO PROCEDURE FOR REGISTRATION AS INSOLVENCY PROFESSIONAL Application 7 Acknowledge application submit additional documents Summon for appearance Board is of the opinion the registration ought not be granted shall communicate the reasons to applicant 60 45 Grant Certificate of Registration 15 Opportunity of being heard 30 Accept Reject

Information Utilities: AMITA DESAI & CO Information Utilities: IU are specialized licensed bodies which would collect maintain and disseminates information relating to the indebtness of the Company.

AMITA DESAI & CO Functions of IUs Create and store financial information in universally accessible format Accept electronic submissions of financial information Accept , in specified form and manner, electronic submission of financial information Meet the minimum service quality standard as per regulation Get the information received from various person authenticated by all concerned person before storing such information Provide access to financial information stored as specified by regulations Publish such information as specified by regulations Have inter-operability with other information utilities

Insolvency Professional Entities: AMITA DESAI & CO Insolvency Professional Entities: Who is eligible? Limited Liability Partnership Registered Partnership Firm Company Majority of designated partners are insolvency professionals Majority of partners are insolvency professionals Majority of whole time director are insolvency professionals

Forms & Fees: Forms Fees Purpose AMITA DESAI & CO Forms & Fees: Insolvency and Bankruptcy Board of India (Insolvency Professional Agencies) Regulations, 2016 Forms Fees Purpose Form A Rs.10 Lakhs Or Rs.5 Lakhs Application for fresh or renewal registration as insolvency professional agency. Form B certificate of registration (fresh or renewal)

Forms & Fees: Forms Fees Purpose AMITA DESAI & CO Forms & Fees: Insolvency and Bankruptcy Board of India (Insolvency Professionals) Regulations, 2016 Forms Fees Purpose Form A Rs.10000/ Or Rs.5000/- Application for registration as an insolvency professional / insolvency professional for limited period Form B Certificate of Registration as an insolvency professional Form C Application for recognition as an insolvency professional entity Form D Certificate of recognition as an insolvency professional entity

(National Company Law Appellate Tribunal) AMITA DESAI & CO Appeals: Application within 30 days of order. Extension may be granted if there is sufficient cause of delay. (National Company Law Appellate Tribunal) NCLAT

AMITA DESAI & CO Grounds of Appeals: Approved resolution plan is in contravention of provision of any law Material irregularity in exercise of power by resolution professional during corporate insolvency resolution period Debt owed to operational creditor of the corporate debtor have not been provided for in resolution plan Insolvency resolution process cost have not been provided for repayment in priority of all other debts Resolution plan does not comply with the criteria specified by IBBI liquidation order passed may be filed on grounds of material irregularity or fraud committed in relation to such a liquidation order

AMITA DESAI & CO Advantages: The Code seeks to shift from revival/recovery to resolution. This will ensure maximum value of assets recovered from the debtor, thus helping the balance sheets of the creditor. The fixed time-period and predictable procedural methods will encourage creditors to join the collective insolvency resolution, rather than initiate individual actions.

AMITA DESAI & CO Advantages: The Code aims at promoting investments, freeing up banks’ resources for other productive uses, boosting credit markets The Code shall force failed firms to shut shop, can lead to a survival of the fittest in the job market too. Industry anticipates that the change will provide an easy exit option for insolvent and sick firms.

AMITA DESAI & CO Advantage: The Code ensures that delays arising from the court proceedings are also reduced to the minimum. The principal business decisions such as the economic viability of the debtor, will be determined through negotiations between the debtor and creditors – an exercise that will be facilitated by insolvency professionals. The role of the NCLT is primarily to ensure that the procedures are complied with and no illegality or fraud has taken place.

AMITA DESAI & CO Concerns: It appears that the new Code doesn’t replace the existing laws (and only amends 11 laws), there must at least be a clear limit of when these laws would apply and of overriding provisions in cases of conflict with the code, if we are to avoid reverting to the old regime of chaos and uncertainty. The waterfall mechanism provides priority payment of proceeds following liquidation, Equity shareholder are given the least importance has raised certain eye brows.

AMITA DESAI & CO Concerns: The Code is also quite ambitious, it proposes the establishment of a new regulator, the creation of a new profession of insolvency professionals and the establishment of institutions known as information utilities that are designed to provide accurate information on defaults. These institutions and practices will take time to establish and there need to be well thought out transitional arrangements in the interim. Equally essential is significant training for insolvency professionals and judges if insolvency resolution and liquidation are to be the efficient and time-bound processes.

AMITA DESAI & CO Conclusion: The Insolvency and Bankruptcy Code, 2016 is totally creditor oriented resulting in a strengthened grip over the assets of corporate debtor. The Code shall face certain hiccups during implementation since it will be difficult to find resolution professionals and also NCLT will be flooded with enormous number of cases since the earlier applications are also transferred to NCLT now.

AMITA DESAI & CO Conclusion: The Insolvency and Bankruptcy Code, 2016 has shifted the entire load to a new entity called Resolution Professional. It is his duty, under the statue, to conduct the entire process of insolvency and liquidation of corporate person with in time. Due to the time bound nature of insolvency process the creditor can recover their dues with ease but management must coordinate with Resolution Professional, as he cannot have detailed understanding and technical knowledge about the Corporate Person that also within time of 180 days.

AMITA DESAI & CO

For any query, Please contact us on Amita Desai & Co. Company Secretaries Mumbai- India Tel 91 22 2684 5920/21/23 Email : info@amitadesai.com www.amitadesai.com 90