1. Insolvency and Bankruptcy Code, 2016
Corporate Insolvency & Its Resolution Process – a Future perspective
Underneath
Insolvency and Bankruptcy Code, 2016

2. Corporate Consultants and Advocates
Presentation by
A. K. Kuchhal
Managing Partner
IndiaCorp Law
Corporate Consultants and Advocates
In association with M/s A. K. Kuchhal & Co.,
Company Secretaries

3. Background
At present the individual and corporate bankruptcy is governed by a host of legislations making the procedure quite complex and cumbersome. The Insolvency and Bankruptcy Code, 2016, however is a consolidated single code that will govern insolvency and bankruptcy proceedings in the future.
The Insolvency and Bankruptcy Code is a new generation law that provides efficient revival mechanism and also throws challenges in the form of capacity building, harmonization of various laws, creation of insolvency professionals, development of regulatory platform and so on.

4. Journey So Far
Vishwanathan Committee constituted on 22 August 2014 which provided its final Report on 04 November 2015.
MOF invited Comments in Nov 2015
Insolvency & Bankruptcy Code Introduced in Lok Sabha on 21 Dec 2015
Passed by Lok Sabha on 05 May 2016.
Passed by Rajya Sabha on 11 May 2016.
Finally, the Code received the Presidents Assent on 28 May 2016.

5. Structure of the Code
Code has 255 sections divided into 5 parts as below-
Part I Preliminary (section 1-3)
Part II Insolvency resolution and liquidation for
corporate bodies (Section 4-77)
Part III Insolvency resolution and bankruptcy for
individuals and partnership firms
(Section )

6. Part IV - Regulation of Insolvency Professionals,
Agencies and Information Utilities
(Section )
Part V - Miscellaneous (Section )
Schedule - Eleven Schedules
(Schedules provide for amendments to be carried out in other statues such as Companies Act, 2013 etc )

7. Objective of the Code
To Resolve Insolvency with Lesser Time Involved, Lesser Loss in recovery and higher level of Debt financing across instruments
Time – bound resolution of insolvency and bankruptcy process
Single consolidated legal framework for insolvency and bankruptcy resolution dealing with Body Corporate, Partnership Firms and Individuals;

8. Objectives… Contd.
Empowers all class of Creditors (Secured & Unsecured Lenders, employees, Trade Creditors, Regulatory authorities) to trigger a Resolution process in case of non payment of a valid claim.
The Code also ensures that, when the negotiations fail to establish viability, the outcome of bankruptcy must be binding.

9. Why it’s Code
“Code” is usually known as a collection or compendium of Laws.
It refers to a systematic and comprehensive compilation of laws, rules or regulation that are consolidated and classified according to a particular subject matter.

10. Insolvency, Bankruptcy & Liquidation
Insolvency is the inability of a person or corporation to pay their Debts as and when they become due and payable.
Bankruptcy is when a person is declared incapable of paying their due and Payable bills.
Liquidation is the process of winding up a corporation or incorporated entity.

11. Applicability of Code
Any company incorporated under the Companies Act, 2013 or under any previous company law.
Any other company governed by any special Act for the time being in force.
Limited Liability Partnership incorporated under the Limited Liability Partnership Act, 2008.
Any other body incorporated under any law for the time being in force, as the Central Government may, by notification, specify in this behalf.
Partnership firms and individuals.

12. Regulatory Mechanism under the Code

13. Regulatory Mechanism…
Insolvency & Bankruptcy Board of India
Insolvency Professional Agencies
Information Utilities
Insolvency Professional
Adjudication Authority

14. Adjudication Authorities
Adjudication Authority is a Body that would have exclusive jurisdiction to deal with Insolvency matters, Which is
NCLT – In case of Companies and LLP
DRT – In case of Individuals and Partnership Firms
The Code also provide for appeal to Appellate tribunal against the Order of Adjudication Authority, which is NCLAT & DRAT respectively.

15. Insolvency & Bankruptcy Board of India
IB Board as established u/s 188 (1) 0f the Code. It would consist of Members including representatives from MCA, MOF, RBI and would regulate the appointment of Insolvency Professional Agencies, Insolvency Professionals and Information Utilities.

16. Insolvency Professional Agencies
(Chapter III and Chapter IV of Part IV)
As per Section 3(20) any person registered with the Board as an Insolvency Professional Agency.
IPA is the Body that would admit Insolvency Professionals as members and develop a Code of Conduct and promote transparency and best practices in governance

17. Insolvency Professionals
As per Section 3(19) any person enrolled u/s 206 with an insolvency professional agency as its member and registered with the Board as an insolvency professional u/s 207.
IP are professionals who are member of insolvency agency who would take the role of Resolution professional or Liquidator / Bankruptcy trustee in an insolvency resolution process.

18. Information Utilities
Section 3(21) means a person registered with Board as Information Utility u/s 210
IU are specialised licensed bodies which would collect, maintain and disseminate Information relating to the Indebtedness of Companies.
Any Person (financial creditor /operational creditor ) can submit/ access the financial information from the Information Utilities.

19. Insolvency Adjudication process

20. Insolvency and Bankruptcy Code, 2016
INSOLVENCY RESOLUTION AND BANKRUPTCY FOR COMPANIES & LLP
INSOLVENCY RESOLUTION AND BANKRUPTCY FOR INDIVIDUAL & PARTNERSHIP FIRMS

21. Insolvency Resolution & Bankruptcy for Companies & LLP

22. Persons who may Initiate...
Financial Creditor As per Section 5(7) of IBC “financial creditor” means any person to whom a financial debt is owed and includes a person to whom such debt has been legally assigned or transferred to;
Operational Creditor As per Section 5(20) “operational creditor” means a person to whom an operational debt is owed and includes any person to whom such debt has been legally assigned or transferred
Corporate Debtor itself As per section 3(8) of the IBC “corporate debtor” means a corporate person who owes a debt to any person;
* Person includes a person resident outside India

23. Persons not entitled to make Application
A Corporate Debtor undergoing a corporate insolvency resolution process; or
A Corporate Debtor having completed corporate insolvency resolution process twelve months preceding the date of making of the application;
A Corporate Debtor or a financial creditor who has violated any of the terms of resolution plan which was approved twelve months before the date of making of an application under this Chapter; or
A Corporate Debtor in respect of whom a liquidation order has been made.

24. PROCESS IN GENERAL NCLT shall within 14 days of receipt
Initiation of Corporate Insolvency Process
Application to National Company Law Tribunal (NCLT)
NCLT shall within 14 days of receipt

25. PROCESS Rejects the Application if it is incomplete
…..CONTINUED
Admit the Application if it is complete
Rejects the Application if it is incomplete
Date of Admission of the Application is called Insolvency Commencement Date
NCLT shall With in 7 days of acceptance or rejection give notice to Applicant & to Corporate Debtor

26. ... CONTINUED Declaration by NCLT
PROCESS
... CONTINUED
The Insolvency Process shall be completed within 180 days (single extension of 90 days)
Declaration by NCLT
Public Announcement after Appointment of Interim Resolution Professional
Declare a Moratorium
Appointment of Interim Resolution Professional within 14 days of receipt of Application

27. In their 1st meeting within 7 days of the constitution
PROCESS
... CONTINUED
Constitution of committee of creditors, comprising of all financial creditors
In their 1st meeting within 7 days of the constitution
(section 22(1))

28. Submission of resolution plan to NCLT
PROCESS
..... CONTINUED
Resolve to appoint Interim Resolution Professional as Resolution Professional
Replace the Interim Resolution Professional by another Resolution Professional or
All decision of the committee shall be taken by a vote of not less than 75 % of voting share of financial creditor
Preparation of information memorandum by resolution professional for formation of resolution plan
Submission of resolution plan to NCLT

29. PROCESS NCLT shall, by order Appeal to NCLAT Moratorium ends
..... CONTINUED
NCLT shall, by order
Pass Liquidation Order
Reject the Resolution Plan
Approve the Resolution Plan
Appeal to NCLAT
Moratorium ends

30. SPECIFIC ISSUES…..

31. ELIGIBILITY for Financial Creditor
Minimum Amount of the default required Rs 1,00,000.
Which can be extended to Rs. 1,00,00,000
by Central Government.

32. An Application shall be made to Adjudicating Authority , Along with
Financial Creditor
Record of the Default recorded with the Information Utility
The name of the resolution professional proposed to act as an interim resolution professional

33. An Application shall be made to Adjudicating Authority , Along with
Operational Creditor
A Copy of Demand Notice delivered to Corporate Debtor
An Affidavit that no notice given by Corporate Debtor a copy of the certificate from the financial institutions maintaining accounts of the operational creditor confirming that there is no payment of an unpaid operational debt by the corporate debtor.

34. An Application shall be made to Adjudicating Authority , Along with
Corporate Debtor
Books of Account
The resolution professional proposed to be appointed as an interim resolution professional.

35. MORATORIUM
The Code Provides for an automatic moratorium of 180 days against any debt recovery actions by the Creditors. The Moratorium can only be extended by a further period of 90 days in exceptional circumstances.
The period of moratorium would be excluded for computation of period of limitation

36. MORATORIUM It Includes –
Institution/Continuation of suit or proceedings against the corporate debtor
Transferring or disposing off any asset by the corporate debtor
Recovery of any property by an owner where property is occupied/ is in possession of corporate debtor

37. LIQUIDATION

38. Initiation of Liquidation
NCLT doesn’t receive any resolution plan with in the CIRP Period
NCLT rejects the Plan
Committee of creditors decides to liquidate
Debtor contravenes Plan
CoC doesn’t agree on workable resolution plan with 180 (+90) days – CoC decides to liquidate

39. Effect of Liquidation Order
APPOINTMENT OF LIQUIDATOR
Resolution Professional to be appointed as liquidator by Adjudicating Authority, unless replaced by NCLT.
Powers of Board of Directors/ Partners to vest with the liquidator
Effect on Legal Proceedings
When a liquidation order has been passed, no suit or other legal proceeding shall be instituted by or against the corporate debtor.

40. Liquidation Process
Formation of Liquidation Estate – Sec 36 deals with taking possession and control of the liquidation estate of corporate debtor
Consolidation, verification, admission/rejection and determination of valuation of claims
Determination of value of claims
Collect Creditors claims within 30 days
Admission or Rejection of Claims by Liquidator

41. Liquidation Process Dissolution of corporate debtor
Contd………
Evaluation and sale/disposal of the assets of corporate debtor
Avoidance of preferential transactions, undervalued transactions,
transactions defrauding creditors and extortionate credit transactions
Distribution of assets
Dissolution of corporate debtor
A copy of an order of dissolution shall be forwarded to the authority with which the corporate debtor is registered within 7 days from the date of such order

42. Priority of payment of Debts.
Insolvency Resolution and Liquidation Cost
Workmen's dues ( for the period of 24 months preceding the liquidation commencement date) and Secured Creditor
Wages and any unpaid dues owed to employees, other than workmen (for the period of twelve months preceding the bankruptcy commencement date)
Central and state government dues.
Unsecured Creditors

43. FAST TRACK CORPORATE INSOLVENCY RESOLUTION PROCESS
(Chapter IV of Part II)
A fast Track CIRP has been provided under the code for the entities with less complex structures, where Insolvency process to be carried out takes a shorter time than the default maximum period allowed.
A Corporate debtor with assets & Income below a level as may be notified by CG
A Corporate debtor with such Class of Creditors or such amount of debt as may be notified by CG
Such Other Category of Corporate Persons as may be notified by the CG

44. FAST TRACK CORPORATE INSOLVENCY RESOLUTION PROCESS
Contd….
An Application may be filed to the NCLT by a Creditor or Corporate Debtor along with
Proof of Default &
Other information to establish the eligibility for Fast track Resolution Process
Time period for completion of CIRP from the insolvency commencement date
Within 90 days
One time Extension of 45 days

45. Voluntary Liquidation
Sec 59 of the Code
Section 59 of the Code provides for the initiation of voluntary liquidation proceedings by the corporate debtor which has not defaulted on any debt due to any person A corporate debtor, being a company may choose to be wound up voluntarily.

46. Voluntary Liquidation
Contd….
Declaration of Solvency by majority Directors via Affidavit stating
The Company has no debts an is able to pay existing Debt.
Purpose of Liquidation is not to Defraud
Documents to be accompanied with Declaration
Audited Financial Statement
Valuation Report of Assets

47. Voluntary Liquidation
Contd….
Special Resolution within 4 weeks of the Declaration
To Liquidate the Company
To appoint the Insolvency Professional as Liquidator
2/3rd majority of Creditors shall approve Special Resolution within 7 Days
Initiation of Liquidation from the date of passing SR.
Approval of creditors must be obtained within 7 days of resolution if the company owes any debt.

48. Voluntary Liquidation
Contd….
Inform ROC and the Board within 7 days of approval by Shareholders or Creditors as the case may be.
Liquidation Process – Liquidation estate, Claims, Admission, Assets, Payments of debts etc.
Liquidator to make Application the AA to pass dissolution order on completion of the Liquidation
AA to pass an order of Dissolution and the order shall be forwarded (within 14 days) to the Authority where Corporate person is registered.
*AA = Adjudication Authority

49. OFFENCES AND PENALTIES
PENALTIES prescribed for:
Concealment of Property
Undertaking Transactions defrauding Creditors
Misconduct in course of Corporate Resolution Insolvency process
Falsification of Books of Corporate Debtor
False representation to Creditors
Contravention of Moratorium or Resolution Plan
Non-disclosure of dispute or repayment of debt by operational creditor
IMPRISONMENT for a term of 3-5 years or Monetary penalty in the range of INR 1,00,000 – 1,00,00,000 or both.

50. Cross Border Insolvency
The Central Government may enter into an agreement with the Government of any country outside India to enforce the provisions of the Code in relation to the assets or property of corporate debtor or debtor, including personal guarantor of a corporate debtor, situated in a country outside India.

51. Benefits Code to help Revival or Wind up of Sick businesses
Cross-border insolvency
Protect workers of a bankrupt company
Fast Track Corporate Insolvency Resolution Process
Voluntary Liquidation of Corporate Persons, Firms and Individuals
Concept of operational creditor.
Consolidation of Insolvency and Recovery jurisdictions.

52. Thank You A. K. Kuchhal C -154, Sector 51 Noida, 201301
Ph.: 0120 – ,
Mob.: