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

2. AMITA DESAI & CO
Introduction:
We at Amita Desai & Co., a firm of Company Secretaries, Mumbai provide various legal and secretarial services to clients across India in matters relating to
Corporate Compliances wrt Companies Act, FEMA and Securities Law ;
Company Secretarial work ;
Corporate Governance ;
Corporate Restructuring ( like Merger ) ;
Drafting of various agreements, ESOP plans etc. ;
FEMA compliances ;
Specific services to start up venture.

3. AMITA DESAI & CO
Introduction:
The Insolvency & Bankruptcy 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 Act is consolidated and amended to reorganize and insolvency resolution of Corporate person, Partnership firms and Individuals in a time bound manner.

4. 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.

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

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

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

8. 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 specify by Central Government.
Initiating bankruptcy or liquidation shall maximize the value of assets

9. 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).

10. Recovery of Debt Due to Banks and Financial Institutions Act, 1993
AMITA DESAI & CO
What gets Subsumed ?
Insolvency & Bankruptcy Code, 2016
SICA Act, 1985
Recovery of Debt Due to Banks and Financial Institutions Act, 1993
SARFAESI Act, 2002

11. 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)

12. Applicable to ? The Code shall apply to:
AMITA DESAI & CO
Applicable to ?
The Code shall apply to:
Companies incorporated as per Companies Act, 2013;
Companies governed by any special Act;
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)

13. Important Terms: Financial creditors Operational creditors
AMITA DESAI & CO
Important Terms:
Financial creditors
Operational creditors
Corporate applicant
Insolvency commencement date
Insolvency resolution period

14. Important Terms: Financial Creditors
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 assigned by a financial creditor.

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

16. Important Terms: Corporate Applicant Corporate Applicant includes:
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.

17. Important Terms: Insolvency commencement date
AMITA DESAI & CO
Important Terms:
Insolvency commencement date
It shall be the date of admission of application for initiating corporate insolvency resolution process by Adjudicating Authority.

18. Important Terms: Insolvency resolution process period
AMITA DESAI & CO
Important Terms:
Insolvency resolution process period
It shall be period of one hundred and eighty days beginning from the insolvency commencement date and ending on one hundred and eightieth day.

19. 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

20. 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

21. AMITA DESAI & CO 180 days + 90 days (ext) 14 14 30 Submit RP to NCLT
Default in Payment of Debt Due
Application to National Company Law Tribunal (NCLT) 14
Reject
Admit
Moratorium shall begin
Corporate Insolvency Resolution Process shall commence
NCLT may grant 7 days extension to rectify the error in application and file the same again.
180 days +
90 days
(ext) 14
NCLT shall appoint Interim Resolution Professional and make Public Announcement 30
Constitute a Committee of Creditors (CoC)and conduct a meeting within 7 days of constitution and finalize the appointment of resolution professional
Acceptance/ Rejection of Resolution Plan by Committee of Creditors with 75% majority
Submit RP to NCLT
Accept
Reject
Implementation of resolution plan
Liquidation Process shall commence
Contravention of resolution plan

22. Liquidation Procedure:
AMITA DESAI & CO
Liquidation Procedure:
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….

23. 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….

24. 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….

25. 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….

26. 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.
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….

27. 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

28. 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

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

30. 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

31. 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.

32. 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

33. 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

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

35. 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)

36. 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.

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

38. 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;

39. 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

40. 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

41. 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.

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

43. 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
15 years post qualification managerial experience after receiving Bachelor Degree in Law OR

44. 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

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

46. 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

47. 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

48. 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)

49. 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

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

51. 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

52. 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.

53. 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.

54. 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.

55. 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.

56. 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.

57. 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.

58. 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.

59. AMITA DESAI & CO

60. For any query, Please contact us on For Amita Desai & Co.
Company Secretaries
Mumbai- India
Tel /21/23 60