Overview of IBC in India, 2016

Concept of IBC

1. O VE R VIEW OF THE INS O L VENCY AND B ANKRUP T CY C ODE 2 016 [IBC 2016]

2. Insolvency and Bankruptcy Code, 2016 What is Insolvency and Bankruptcy

3. Insolvency and Bankruptcy Code, 2016 Why it is called as Code ant as Act.

4. L a w s g o v erning Insol v ency b e f o r e IBC 2016 Si c k Indu s trial Companies (S pe c ial P r o vi s ion s ) A c t, 1 9 85 [SI C A] R e c o v e r y of De b ts due t o Ban k s and Finan c ial In s titutions A c t, 1993 Se c uritis a ti o n and R e c o n s truction of Financial Ass e ts and E n f o r ce me n t of Secu r ity I n t e r e s t Act (SA R F A E SI) A c t, 2 02 Compani e s A c t, 2 13 (Winding up) T h e P r esidency t o wns In s ol v ency Act, 1 9 09 The P r o vincial In s ol v en c y A c t, 1 9 20

5. Insolvency and Bankruptcy Code, 2016 Introduction The Insolvency and Bankruptcy Code, 2016, passed by the Parliament vide notification dated 28.05.2016, is a welcome overhaul of the existing legal framework for resolution of Insolvency of an Entity. The IBC 2016 (Code) is considered as the biggest economic reform next only to GST.

6. Insolvency and Bankruptcy Code, 2016 Introduction The Code deals with insolvency of Corporates, LLPs, Individuals and Partnerships firms. In a time bound manner for maximization of value of assets of such persons. It focus on creditor’s driven insolvency resolution where ever possible and orderly exit wherever require.

7. Insolvency and Bankruptcy Code, 2016 Ease of doing business Markets need freedom broadly at three stages of a business to start a business (free entry), To continue the business (free competition ) and To discontinue the business (free exit). This enables new firms to emerge continuously; and they do business when they remain efficient, and vacate the space when they are no more efficient. This ensures free flow of resources from inefficient uses to efficient uses

8. Insolvency and Bankruptcy Code, 2016 Ease of doing business A firm may fail to deliver as planned for a variety of reasons. It could be because of faulty conceptualisation of business, inefficient execution of business, change of business environment , or even malafide design in some cases . Regardless of the reason, the failure impacts macro economy in multitudes of ways and needs to be addressed expeditiously and scares resources need to released and used for more efficient manner.

9. Need for the IBC 2016 IBC Code 2016 –Codification of all laws that existed in form of various statutes related to insolvency –under one umbrella •Problem of multiplicity of laws related to insolvency in India •No timeframe for resolution of Insolvency •Bad debts and defaulters crisis in Banks

10. I NSOLVENCY RESOLUTION: LONG TIME, POOR SHOW IN INDIA Average recovery, by c o u n t ry. J une 2 1 5 ( Cents on Dollar) I ndia C h i na B razil Russia japan us UK 20 40 60 80 1 00 1 2 3 4 5 Source: World Bank Average t i me, by c o u ntry, J une 2 1 5 ( Years )

11. R oa d map t o IBC 2016 Code I n t r oduced in P arl i ame n t on 2 1 s t Decembe r , 2015 R e f er r ed t o P arl i ame n t a r y S t and i ng Comm i t t ee on 2 3 r d Decembe r , 2015 Comm i t t ee R eport on 2 8 t h Apr i l, 2016 The Co d e passed b y Lok Sabha on 5th M a y , 2016 The Co d e passed b y R aj y a Sabha on 11th M a y , 2016 R ecei v ed the P r es i de n t ’ s asse n t on M a y 28, 2016 Not i fied in the Ga z e t t e of I nd i a as ‘ The Insol v ency and B a nkr u p t cy Code 2016’ ( effective 01.12. 2016)

12. The IBC 2016 - Appli c able to A n y c ompa n y in c orpo r a t ed under the Companies Ac t , 2013 or 1956. A n y other c ompa n y g o v er n ed by a n y special Act f or the time being in f o r ce . A n y Li m i t ed Li a bility P ar t ne r ship . Such other body in c orpo r a t ed under a n y l aw f or the time being in f o r ce as specify by t he Ce n t r al G o v er n me n t . P ar t ne r ship firms and I ndividuals

13. The IBC 2016 Applies for…. Insol v ency Liquidation ----- V olu n tary Liquidation Bankruptcy

14. T o Whom is IBC 2016 Not A p pl i c able ? P art III of t he Code per t ain i ng t o in s ol v ency o f In d ivi d uals and f i rms – does not app l y t o S t a t e of Jammu and K ashm i r The C ode is not appl i c able t o f i nancial se r vice p r o vide r s. F or M FIs, NB F Cs and f i nanc i al se r vice p r ov i de r s separate provisions are in pipeline on which su g g e s t i ons are being invited f r om a l l st a k ehol d e r s

15. Acts M o dified b y IBC 2016 Cha p t er X IX and XX of Com p anies Ac t , 20 13 Cha p t er XIII of t he LLP Ac t , 2 08 Ind i an P artne r sh i p Act 1932 Ce n t r al E x cise Act 1 9 44 In c ome T a x Act 1 9 6 1 Cu s t oms Act 1962 Finance A ct 19 9 4 P a yme n t and Se t t l eme n t S y st ems Act 2 07

16. Acts M o dified b y IBC 2016 R e c o v e r y of De b ts due t o Ban k s a n d Financial In s t i tu t ions Act (RD D BFI), 1 9 93 Securit i z a t i on a nd R e c on s tr u ction of Financ i al A s s e ts and E n f o r ceme n t of S ecuri t y I n t e r e s t Ac t , 2 02 ( S AR F A E SI)

17. Acts R epe a led b y IBC 2016 The P r esi d enc y - t owns In s ol v ency Act, 1 909 The P r o vinc i al In s ol v ency Ac t , 1 9 20 Sick In d u s tr i al Com p an i es (Special P r ov i s i ons) Act,1985 (“ SIC A ”) r epealed f r om 1.12. 20 1 6 . Bo a r d f or Indu s tr i al and Fi n ancial R e c on s truct i on (“ BIFR ”) and the Appe l l a t e Aut h or ity f or Ind u s tr i al and Fi n ancial R e c on s truct i on ( “ AAIFR ”) d i ssol v ed

18. Str u ctu r e of t h e Code The Code i s d i vi d ed i n t o 5 P arts; 255 S ections ; 11 Sche d u l es and 21 C ha p t e r s . o P art I – P r elimina r y – Sec t ion 1 t o 3 o P art II - Insol v ency r esolution and liquid a tion f or c orpo r at e pe r sons – Sec t ion 4 t o 77 o P art III – Insol v ency r esolution and bank r u p t cy f or individuals and par t ne r ship firms – sect i on 78 t o 187 o P art IV – R egul a tion of Insol v ency P r o f essionals, a g encies and i n f orm a tion util i ties – sect i on 188 t o 223 o P art V – Mi s cellaneou s - Sec t ion 224 t o 255 11 Sche d u l es amen d i n g 1 1 e x i s ting Acts Issued 2 Rules and 7 Regulations for operation of the Code.

19. Notified Rules In s ol v ency and Ban k ru p t cy Boa r d of Ind i a (Sala r y , Al l o w ances and other T erms and Condi t ions of Se r vice of C h airpe r son and mem b e r s) Ru l es, 2016 – Not i f i ed o n 2 9 . 8 . 2 16 The Insol v e n cy and Bankr u p t cy B o a r d of In d ia (Application to Adjudicating Authority) R u le s , 201 6 . – Not i f i ed o n 30.11 . 2 16

20. Notified R egul a tions Insol v e n cy and Bankr u p t cy B o a r d of In d ia (Insol v e n cy P r o f ess i onal A g e n ci e s) R eg u l a tions, 201 6 . [21.11.2016] Insol v e n cy and Ba n kru p t cy Boa r d of Ind i a (Model Bye-laws and Governing Board of Insol v e n cy P r o f ess i onal A g e n ci e s) R eg u l a tions , 201 6 . [21.11.2016]

21. Notified R egul a tions Insol v e n cy and Ba n kru p t cy Boa r d of Ind i a (Insol v e n cy P r o f essiona l s) R egu l a tions, 2016 [Notif i e d on 23.1 1 .2016. Has c ome i n t o e f f ect on 29.11.2016]

22. Notified R egul a tions I n sol v ency and Ban k ru p t cy B o a r d of Ind i a (In s ol v ency R eso l ut i on P r ocess f or C orpo r a t e P e r sons) R egul a t i ons, 20 1 6. [Not i f i ed on 30 . 11 . 20 1 6. Has c ome i n t o e f f ect on 1 . 1 2 . 2 1 6] I n sol v ency and Ban k ru p t cy B o a r d of Ind i a (Liqu i d a t i on P r ocess) R egul a t i ons, 20 1 6. [1 5 . 1 2 . 2 1 6 ]

23. Notified R egul a tions I n sol v ency and Ban k ru p t cy B o a r d of Ind i a ( Voluntary Liquidation Process ) R egul a t i ons, 20 1 7 . [Not i f i ed on 3 1 . 03 . 20 1 7 . Has c ome i n t o e f f ect on 1 . 04 . 2 1 7 ] I n sol v ency and Ban k ru p t cy B o a r d of Ind i a ( Information Utilities ) R egul a t i ons, 20 1 7 . [ Not i f i ed on 31 .03. 20 17 . Has c ome i n t o e f f ect on 01 .04 . 2 17 ]

24. Insolvency and Bankruptcy Code, 2016 It envisages an ecosystem comprising Insolvency and Bankruptcy Board of India (Board), Information Utilities (IUs), Insolvency Professional Agencies(IPAs ), Insolvency Professionals ( IPs ) and Insolvency Professional Entities (IPEs ) National Company Law Tribunal (NCLT), National Company Law Appellate Tribunal (NCLAT), Debt Recovery Tribunal (DRT ), Debt Recovery Appellate Tribunal (DRAT), for implementation of the Code.

25. The Code Ti me Bound IRP /RP C r edi t or Based Calmin g P er iod W a t er f all Mechanis m Insol v ency and Ban k r u p t cy Boa r d of India

26. IBC 2016 - K e y Highlig h ts C r e at es ti m e-bound p r ocesses f or in s ol v ency r eso l ut i on of c ompa n i e s and in d iv i d u als. Insol v ency R esol u tion - c omp le t ed with i n 180 d a y s otherwise a ss e ts of bor r o w e r s m a y be sold t o r ep a y c r ed i t o r s. R esol u tion p r ocesses t o be c ond u c t ed b y l icensed i n sol v ency p r o f ess i onals (I P s) r egi s t e r ed with i n sol v ency p r o f ess i onal a g encies ( I P As). E s t ab l i s hment of I n f orm a t i on U tilities (I U s) .

27. IBC 2016 - K e y Highlig h ts The I n sol v ency and Ban k ru p t cy B o a r d of Ind i a will be s e t u p t o r egul a t e f u nct i oning of I P s, I P As and I U s. The N a t i onal Compa n y L a w T rib u nal (NC L T) wi l l adjud i c a t e in s ol v ency r eso l ut i on f or c ompanies and LLP The De b t R e c o v e r y T rib u nal (D R T) will adjud i c a t e i nso l v ency r eso l ut i on f or I individuals and Partnership firm .

28. T h e In s o l v e nc y a n d Ba n kr u p t c y Boa r d of Ind ia ( S 1 8 8 ) Se c tions 1 8 8 - 195 C h a p t er I of p art I V Insol v e n cy P r o f ession al Ag e ncies Se c tions 1 99 -205 Chap t er I I I of pa r t IV Insol v e n cy P r o f ession als Sec tions 2 06 -208 Chap t er IV of part IV I n f orm a tion U tilities Sec tions 2 9 -216 Chap t er V of partIV

29. I n f orm a tion Uti l ities R egi st e r ed Bodies t o c ol l ec t , c ol l a t e, aut h e n tic a t e and dis s e min a t e financial in f o r m a tio n o f d e b t o r s in ce n t r al i sed el e ctronic d at abases . The Code r equi r es c r edi t o r s t o p r o v ide f i nan cial i n f o r m a tio n of de bt o r s t o multip l e utili t ies on an on g oing basi s . Such i n f or m a ti o n w ould b e a v ail a ble t o c r edi t o r s, r esolutio n p r o f essiona l s, liquid a t o r s and other s t a k eho l de r s in insol v ency and bank r u p t cy p r oc e edings. The pu r pose of this is t o r emo v e i n f o r m a tion a s ymme t r y and dep e n den c y on the de bt o r 's mana g e me n t f or cri t i c al i n f orm a ti o n th a t is needed , t o s wiftly r esol v e insol v enc y .

30. Insol v ency P r o f essional A g encies (I P A) I P A - f r o n t l ine r egu l a t or f or the inso l v e n cy p r o f ess i onals. I P As - r eg i s t e r ed body t o admit I n sol v e n cy P r o f essional a s memb e r s and t o d ev e l op c ode of c onduct and p r omo t e be s t p r ac t ic e s in g o v e r nance du r i n g i n sol v e n cy p r oce e d i ngs It also r e d r esses the gri e v ances of c onsume r s a g ain s t its mem b e r s No p e r son shall r e n d e r his se r vic e s as i nsol v e n cy p r o f ess i onal u n d er this Code without be i ng e n r ol l ed a s a mem b er of an I P A

31. Insol v ency P r o f essional A g encies (I P A) IBBI has g r a n t ed r eg i s t r a tion t o f ol lo wing 3 c ompan i es t o act as I P As un d er the IB B I (Insol v e n cy P r o f essional A g e n ci e s) R egu l a tions, 201 6: Ind i an I n s titu t e of Insol v e n cy P r o f essiona l s of ICAI [ w w w .i i i p i c ai.o r g] ICSI Insol v e n cy P r o f essiona l s A g e n cy [w w w .icsi i pa. c om] Insol v e n cy P r o f ess i onal A g e n cy of I n s titu t e of Co s t Ac c ou n t a n ts of India [w w w .ipa i cm a i. i n]

32. Ins o l v ency P r o f es s ional (IP) IP to en r olled wi t h an I P A as i t s me m ber and r egi st e r ed wi t h the IBBI . I nsol v ency and Bankruptcy /Liquidation p r ocess will be mana g ed by th e se l i cen s ed p r o f es s iona l s. The I P s w i ll c o n t r ol t he ass e ts of the de b t or and manage the affairs of business dur i ng the in s ol v ency p r ocess. The I P s w i ll act as Liquidator/Bankruptcy trusty dur i ng the liquidation/Bankruptcy process.

33. Ins o l v ency P r o f es s ional (IP) As on 3 1 . 8 .20 1 8 , Insol v e n cy P r o f essiona l s r eg i st e r ed under R egu l a tion 7 r ead with R egu l a tion 5 o f IBBI (Insol v e n cy P r o f essiona l s) R egu l a tions, 201 6, w i th I BBI = 1987 Information Professional Entities- 80 Information Utilities – 1 (National E-governance services Ltd, Mumbai)

34. IBBI (Insol v ency P r o f essi on a ls) R egul a tions, 2016 Vide Notifi ca tion D a t ed 23.11.16 but appli c able f r om 29.11.16 5 Chapters and 14 R egul a tions Fi r s t Schedule – Code of Conduct f or Insol v ency P r o f essionals Se c ond Schedule – F orm A – Appli c a tion f or R egi s t r a tion as Insol v ency P r o f essional . Se c ond Schedule – F orm B – Cer t ifi c at e of R egi s t r a tion Se c ond Schedule – F orm C – Appli c a tion f or R e c o g nition as Insol v ency P r o f essional E n ti t y Se c ond Schedule – F orm D – Cer t ifi c at e of R e c ognition

35. IBBI (Insol v ency P r o f essi on a ls) R egul a tions, 2016 Chapter – I – General Chapter – II – Insolvency Examination Chapter – III – Registration of Insolvency Professionals Chapter – IV – Temporary Surrender and Disciplinary proceedings Chapter – V - Recognition of Insolvency Professional Entities.

36. R egi s t r a tion; Qualifi c a tions and Experience – R egul a tion 5 An ind i vidual sha l l be eligib l e f or r egi s t r a t i on, if h e - (a) has passed the N a t i onal In s ol v ency E x ami n a t i on; (b) has pas s ed the National In s ol v ency E x ami n a t i on, and has fi f t een y ea r s of e xperience in mana g eme n t, a f t er he r ecei v ed a Bac h elo r ’ s deg r ee f r om a un i v e r s i ty e st abl i shed or r e c ogni z ed b y l a w; or

37. Qualifi c a tions and Experience – R egu l a tion 5 ( c ) has passed the Limi t ed In s ol v en c y E x amin a tion and has t en y ea r s of e xpe r ience as – (i) a cha r t e r ed a c c ou nt a n t en r olled as a memb er of the In s titu t e of Char t e r ed A c c ou nt a n ts of India, (ii) a c ompa n y sec r e t a r y en r olled as a m e mb er of the In s titu t e of Compa n y Se c r e t aries of In d ia, (iii) a c o s t a c c ou nt a n t en r olled as a me mber of the In s titu t e of C o s t A c c ou nt a n ts of India, or (iv) an ad v o ca t e e n r olled with a Bar Council.

38. P r o f essional Oppor t unities in IBC 20 1 6 An Insolvency Professional (IP) may hold any of the following roles under this code to resolve the Insolvency of Companies , Limited Liability Partnership (LLP), Partnership firm and Individuals Bankruptcy Trusty for Partnership firm and Individuals Liquidator for Companies and LLP

39. R e c ogn ition of Insol v ency P r o f essional E n tities – R egu l a tion 12 A l i mi t ed liab i l i ty partne r ship, a r eg i s t e r ed partn e r ship f i r m or a c ompa n y m a y be r e c ognis e d as an i nsol v e n cy p r o f essional e n tity i f- (a) a major i ty o f the partne r s of the l im i t ed li abi l ity pa r tn e r ship or r eg i st e r ed partn e r ship firm a r e r eg i s t e r ed a s i nsol v e n cy p r o f essiona ls; o r (b) a majority of the whol e - time d i r ec t o r s of the c ompa n y a r e r eg i s t e r ed a s i nsol v e n cy p r o f essiona ls, as the c ase m a y be

40. Adju d i c a ting Authorities F or C o rpo r a t e N a tional C om p a n y L a w T rib un al ( N C L T) N a tional C om p a n y L a w Ap p ell at e T rib un al ( N CL A T) F or Individuals and Firms De b t R e c o v e r y T rib un al ( D R T) De b t R e c o v e r y Ap p ell at e T rib un al ( DR A T) Sup r e m e C o urt

41. Corp o r a t e Insolvency Process (including LLP) No D e f ault D e f ault V o l u n t a r y L i qu i d a t i on u / s59 Ins o l v ency R e s olution P r oce s s u / s 6 F i nancial C r edi t o r s Ope r a tional C r edi t o r s D e f aulting De b t or F a s t T r ack u / s 55 L iq ui d a t i o n

42. F a s t T r ack C o rp o r a t e Ins o l v ency The Insol v e n cy C ode furt her p r escri b e s a f a s t t r ack c orpo r a t e in sol v e n cy p r ocess f or the e n titi e s with l e ss c ompl e x s tructur i ng or busi n e sses whe r e the whole i nsol v e n cy p r ocess wi l l be r e q u i r ed t o be c ompl e t ed within a p e r i od of 90 d a y s or an e x t e n d e d p e r i od of f urt her 45 d a y s a t mo s t. The Ce n t r al Go v e r nme n t wi l l p r escri be the classes of e n titi e s based on t he ass e ts and l i abi l it i es, amou n t of d e b t and other cri t e r ia, wh i ch wi l l be su b ject t o the f a s t t r ack p r ocess.

43. Fast Track CIRP – U/s 55 An application for fast track CIRP may be made in respect of the following corporate debtors - - A corporate debtor with a Share capital of less than 50 Lakhs or Turnover of less than 200.00 Lakhs Start-ups Unlisted companies with total assets of less than 100.00 lakhs

44. P r oce s s Flow of S u cces s ful IRP D e f ault of ov er R s 1, 0, 00 P e ti t ion wi t h Adjudi ca ting Authori t y [NC L T] Appoi n t i n t erim Inso l v ency P r o f essional C r edi t o r s Co m mi t t ee F or m a ti o n Co n firm a ti o n of IP R esolution Plan p r oposed b y c r edi t o r s P r opo s al App r o v ed b y 66 % C r edi t o r s P r oposal Ac c ep t ed b y Adjudi ca ting Authori t y

45. Appli c a tion of IBC 2016 W h o c an apply : Financial C r edi t o r s, O pe r a tional C r edi t o r s or the d e f aulting de b t or hi m se l f . N a tu r e of d e f ault th a t tr i g g e r s c orpo r at e in s o l v ency: A n y financial or ope r a tional c r edi t or c an apply f or inso l v ency on d e f ault of de b t or i n t e r e s t p a yme n t e x ceeding INR 1 , , 00. H o w e v e r , ope r a tional c r edi t or mu s t gi v e 10 d a y s notice t o d e f aulting de b t o r s. W h om t o apply : A d judi c a ting A u thority ( A A ) - NC L T Do c ume n ts t o be fi l ed : Along w i th appl ic a tion furnish – R e c o r d of the d e f ault r e c o r ded w i th the i n f o r m a t i on ut ili ty or e viden c e of d e f ault. The na m e of the r e s o l ut i on p r o f e s sional p r opos ed t o act as an i n t eri m r e s o l ut i on p r o f e s sional and In c as e of op e r a t i onal c r e di t o r s p r oof of giving not i c e t o d e b t or and af fid a vit th a t the r e i s no d i spu t e r el a t i ng t o c l aim and cer t i fi c a t e f r om b ank of c r e di t or th a t amou n t has not be e n r ece i v ed. a n y other i n f orm a t i on as m a y be s p e c i fied by the B oa r d

46. Time l im i ts Normal Insol v e n cy R esol u tion P r ocess shall be c ompl e t ed with i n a p e r i od of 1 8 d a y s f r om d a t e of adm i ssion o f admission of appl i c a tion. The p e r i od c an be e x t e n d e d if r esol u tion passed a t a me e ting of the c om m i t t ee of c r e d i t o r s b y a v o t e of 66 % of t he v oting sha r es. It c an be e x t e n d e d f or a p e r i od not e x ce e d i ng 90 d a y s. Such e x t e n sion c annot be g r a n t ed mo r e than once In c ase of f a s t t r ack the m a x i mum pe r iod is 90 d a y s e x t e n dable t o fu r ther 45 d a y s.

47. Mo r a t orium The N C L T o r de r s a mo r a t orium o n the deb t or's ope r a t i ons f or the period of t h e IRP d u ri n g which no a ction c an be t a k en a g ain s t the c ompa n y or t he ass e ts of the c ompa n y . This ope r a t es as a ' c alm per i od ' duri n g whi c h no judic i al p r oceedings f or r e c o v e r y , e n f o r ceme n t of secur i ty i n t e r e s t, s ale or t r an s f er of ass e t s, or t er m in a t i on of esse n t i al c o n t r acts c an t a k e place a g ain s t the de b t o r .

48. App o i n tme n t and t enu r e of i n t erim r esolutio n p r o f essional (IRP) AA shall appoi n t a n I RP w ithin 14 d a y s f r om insol v ency c ommenc e me n t d a t e. No dis c iplina r y p r oce e dings s h all be pending a g ain s t i n t e r im r eso l ution p r o f essiona l . Boa r d shall wi t hin 1 d a y s of r ec e i p t of r e f e r ence f r om A A , r e c ommend the name of an insol v ency p r o f essional t o AA a g ain s t whom no d iscipli n a r y p r oce e dings a r e pending. Mana g em e n t of the a f f ai r s of the c o r po r a t e d e b t or shall v e s t in IR P . IRP h a v e p o w er similar t o BOD of c ompa n y and should t a k e s t e p s t o mai n t ain v alue of ass e ts and c on s ti t u t e Commi t t ee of C r edi t o r s The term of the IRP is for 30 days from the date of his appointment. The IRP on receipt of all claims and other information, shall constitute the COC and prepare a Information memorandum. The first meeting of COC shall be within 7 days of its constitution and will be conducted by IRP.

49. Pu b lic announceme n t of IRP The IRP within 3 days of his appoint shall issue the Public announcement. Public announceme n t shall c o n t ain f ol l owing i n f orm a tion name and add r ess of the c orp o r a t e deb t or under the c orp o r a t e ins o l v en c y r esolution p r ocess name of the authority with which the c orp o r a t e deb t or is in c orp o r a t ed or r egi st e r ed the la s t d at e f or submi s si o n o f claims d e t ails of the i n t erim r esolution p r o f essional who shall be v e st ed with the m a na g eme n t of the c orp o r a t e deb t or and be r esponsible f or r e c eiving cl a ims penalties f or f alse or misle a ding cl a ims the d at e on which the c orp o r at e ins o l v ency r esol u ti o n p r ocess shall close

50. Actions R equiring App r o v al of C o mmi t t ee of C r edi t o r s R aise a n y i n t eri m finance be y ond li mit d e c i d e d by the c ommi t t ee C r e a t e a n y secur i ty i n t e r e s t o v er the asse t s of the c orpo r a t e d e b t or C hange t he c api t al s t r uc t u r e of the c o r po r a t e de b t or R e c o r d a n y change i n the owne r sh i p i n t e r e s t of the c orpo r a t e d e b t or S p e n d amou nt b e y ond li mit sanc t i oned by c r e di t o r s c ommi t t ee U n d e r t a k e a n y r el a t ed party t r an s ac t i on A m e nd a n y c on s t i tut i onal docume n ts of the c orpo r a t e d e b t or D el e g a t e its author i ty t o a n y other p e r son D ispose of or perm i t the disposal of sha r es M a k e a n y change i n the m ana g em e nt of the c orpo r a t e d e b t or or i ts s u b sidiary T r ans f er r i gh t s or financ i al d e b ts or ope r a t i onal d e b ts und er m a t eri al c o n t r ac t s othe r w ise than in the o r dina r y c ou r se of busine s s M a k e c han g es in the a ppo intme n t or t erms of c o n t r act of s uch p e r son n e l as sp ec i fied by the c ommi t t ee of c r e di t o r s M a k e c hanges in the appoi n tme n t or t erms of c o n t r a c t of s t a tu t ory audi t o r s or i n t ernal aud i t o r s of the c orpo r a t e d e b t or

51. Liquid a tion Scenario The c r edi t o r 's c ommi t t ee r eso l v es wi t h 66 % maj ori t y v oting by value t o liquid a t e the c o r po r a t e d e b t or a t a n y time during the IR P ; The c r edi t o r 's c ommi t t ee does not app r o v e a r eso l ution plan wi t hin 1 80 d a y s or such e x t ended pe r iod as app r o v ed b y the NC L T ; T h e NC L T r ejects the r esolutio n plan s u b m i t t ed t o it by the c r edi t o r ’ s c ommi t t ee on t echni c al g r ounds; or The de bt or c o n t ra v en es the a g r e e d r eso l ution plan and an a f f ec t ed pe r son ma k es an appli ca tio n t o the NC L T t o liquid a t e t he c o r po r a t e d e b t o r . Corporate d e bt or c an also o p t f or v olu n t a r y liquid a ti o n b y a special r eso l ution in a Gen e r al M eeting.

52. Liquid a tion E s t a t e T he li qu i d a t or t o f orm a li qu i d a t i on e s t a t e wh i c h w i l l i nc l ud e a n y ass e ts o v er w hich th e c orpo r a t e d e b t or has owne r ship righ ts, enc u mb e r ed ass e ts, t angible and in t angible ass e ts, ass e ts is s u ed as c ol l a t e r al o v er which c r edi t o r s h a v e r eli q uish ed r i g h ts all p r oceeds of li q ui d a tion as and when th e y a r e r eali z ed F o l l o w i ng shall not be i nc l ud ed i n li qu i d a t i on e s t a t e as set and shall not be us ed f or r e c o v e r y – ass e ts owned by a thi r d pa r ty which a r e in possession of the c orpo r a t e d e b t or ass e ts in s e cu rity c ol l a t e r al held b y financial s e r v ic es p r o v i d e r s and a r e sub ject t o n e t tin g and s e t- o f f in mu l t i - l a t e r al t r adi n g or cl ear in g t r an sactions p e r sonal ass e ts of a n y sh a r ehold er or p a r tn er of a c orpo r a t e d e b t or as th e c ase m a y b e p r o v i d ed such ass e ts a r e not held on ac c ou n t of av oi d an ce t r an sactions ass e ts of a n y Indian or f o r eign subsidia r y of the c orpo r a t e d e b t or a n y ot h er ass e ts as m a y b e specified by th e Boa r d , i n cludi n g ass e ts w hich c ould be subject t o s e t- o f f on ac c ou n t of mutual deali n gs b e t w e e n th e c orpo r a t e d e b t or and a n y c r edi t o r .

53. P o w e r s and duties of L iquid a t or T o v er i f y clai m s T o t a k e i nt o his c u st ody or c o n t r ol a l l the as s e ts, p r opert y , e f f ects and actionab l e T o e v alu at e the as s e ts and p r operty of the corpo r at e de b t or T o t a k e m e asu r es t o p r o t ect and p r es e r v e the as s e ts T o c arry on the bus i ness of the corpo r at e de b t or f or its ben e ficial l i quid a tion S e l l the i m m o v able and m o v able p r operty and actiona b le c la i ms of the c orpo r at e de b t or in l i quid a tion by public au c tion or pri v at e c o n t r act T o i n v i t e and s e t tle clai m s of c r edi t o r s and clai m a n ts and di s tr i bu t e p r oceeds T o in s titu t e or d e f end a n y suit, p r osecution or other le g al p r oceedin g s, ci v il or cri m inal, in the name of on behalf of the c orpo r at e de b t or T o i n v e s ti g at e the financial a f f a i r s of the c orpo r at e de b t or t o d e t e rm ine unde r v alued or p r e f e r e n tial t r ansactions

54. O r der of priority f or di s tribution of A ssets The o r der (called as waterfall process) is as f oll o w s : 1. Inso l v ency r e l at ed c o s ts 2. a. Secu r ed c r ed i t o r s and b. W orkmen dues u p t o 24 mo n ths 3. Other empl o y ee ’ s salar i es/d u es up t o 12 mo n ths 4. Fi n ancial de b ts (unsecu r ed c r ed i t o r s) a. G o v ern m e n t dues (up t o 2 y ea r s) b. Debt of secured creditors (Shortfall) 6. A n y r emai n i n g de b ts and dues (Operational Creditors) 7. Preference shareholders 8. E q u i t y shareholders

55. Rig h ts of Secu r ed C r edi t or during Liquid a tion P r oc e ss A secu r ed c r edi t or m a y choose t o r eali s e his sec u ri t y and r ecei v e p r oceeds f r om t he sale of the secu r ed ass e ts in fi r s t prior i t y . If the secu r ed c r edi t or e n f o r ces h is clai m s out s ide the li q ui d a t i on, he m u s t c o n tr i bu t e a n y e x cess p r oceeds t o the li q uid a t i o n tr u s t and in c ase of a n y short f all, the secu r ed c r edi t o r s will be be l ow unsec u r ed c r edi t o r s t o the e x t e n t of t he shor t f al l .

56. A v oida n ce T r an s action s Liq u id a t or has rig h t t o c ancel or modify t erms of cer t ain t r ansac t ions e n t e r ed i n t o b y d e f aul t ing e n t i ty with i n one y ear of t he in i t i a t i on of IRP wi t h thi r d part i es or wit h in t w o y ea r s of i ni t i a t i on wi t h r el a t ed par t ie s , which in his o pin i on a r e of P r e f e r e n t i al in n a tu r e or Undervalued transactions pri m ari l y e n t e r ed i n t o t o ben e f i t a part i cular cla s s of p eople.

57. Insol v ency R eso l ution P r ocess Bankru p t cy P r ocess IN S O L VE N CY O F INDIVID U ALS AND FIRMS F r esh S t art o p tion

58. Ba s ic P r oce d u r e F or individuals and unlimi t ed partn e r shi p s, the Code appli e s in all c ases w h e r e the minimum d e f ault amou n t is I NR 1 00 and ab o v e. [Minimum amou n t of d e f ault of higher v alue which shall not be mo r e than Rs. 1 /- m a y be notified] T w o di s tinct p r ocesses: F r esh S t art O r der ( F SO) - indi v iduals with ass e ts and in c ome l o w er than spec i fied am ou n ts will be e ligible f or a discha r g e f r om their quali f ying debts Their debts will be wri t t en o f f , giv ing the deb t or a “f r esh s t ar t ” In s ol v en c y R esolution P r ocess (IRP) - p r ocess of n e g oti a tion b e t w e e n deb t o r s and c r edi t o r s supe r vi s ed by a R esolution P r o f essional ( R P)

59. F r esh S t art O r der ( F SO) P art III Ch a p t er II Sec t ion 8 -93 This o p tion is f or d e f aults whe r e am o u n t i n v ol v ed a r e p e t t y . Who c an A p ply: D e f ault i ng Indivi d ual wit h : A n nual g r oss inco m e not e x ceeding Rs. 60 , A g g r e g at e v alue of as s e ts not e x ceeding Rs. 20 , D e f aulting loan not e x ceeding Rs, 3 5 , 00 No d w e l l i ng house No p r e v i o us f r e s h st art, in s o l v enc y , e t c Whom t o apply : Adjudi c a ting Au t hority: D R T P r ocess : The r esolut ion ( inso l v en c y) p r o f es s iona l will i n v e s ti g a t e and p r epa r e a final li s t of all quali f ying de b ts within 180 d a y s f r om the d at e o f appli c a tion. On the e xpi r y of this p e riod, t h e D R T m a y pass an o r der disc h a r gi n g de bt or f r om t h e quali f ying d e b ts and ac c o r d an opp ortuni t y t o the de b t or t o s t art a f r esh, financiall y .

60. Insol v ency R es o lution P r oce s s P art III Ch a p t er III Who Can apply : B y c r edi t or hi m self or th r ough r esolut ion p r o f essional of d e f ault i ng de bt o r . Ho w e v er in c ase of partne r ship firms, t he appli c a tion c an be made by all or maj ority of the partne r s. Appli c a tion b y c r edi t o r s of partne r ship firm c an be made f or insol v en c y p r oce e ding a g ain s t a single p artner or t h e f irm. De b t or shall not be e n ti t led t o ma k e an appli c a tion under su b - sec t ion (1) if he i s — (a) an undischa r g ed bankru p t; (b) unde r g oing a f r esh s t art p r ocess; ( c ) unde r g oing an inso l v ency r eso l ution p r ocess; or (d) unde r g oing a b ankrup t cy p r ocess

61. I n t erim Mo r a t orium a nd ap p oi n tme n t of r esolutio n p r o f essional An i nt er i m mo r at or i um c om m ences on the d at e of appl ic a tion ti l l the d at e of adm i s s ion of appl ic a tion during which no l e g al action c an be p r oceeded or in i ti a t ed in r e s pect t o a n y de b ts. Within s e v en d a y s of r ecei p t of appl ic a tion, D R T w i ll e i ther nom i n at e a r eso l ution p r o f es s ional or in ca s e appl ic a tion is f i l l ed b y th r ou g h a r eso l ution p r o f es s ional c o n fi r m th a t t h e r e a r e no di s cipl i na r y p r oceedin g s pen d ing a g ain s t such r eso l ution p r o f es s ional t o t h e Boa r d. Boa r d w i ll in n e xt s e v en d a y s e i ther c o n fi r m or r eject t h e appoi n tm e n t w ith i n n e xt s e v en d a y s. The r eso l ution p r o f es s ional so appoi n t ed w i ll e x am i ne and submit a r eport t o the A d judi c a ting A u thority r e c om m ending f or app r o v al or r ejection of the appl ic a tion w i thin 10 d a y s of appoi n tm e n t. The A d judi c a ting A u thority w i ll then w i thin f our t een d a y s f r om the d at e of submi s s i on of the r eport, either admit or r eject t h e appl ic a tion.

62. The p r oce s s If the a p pli c a tion is accep t ed, a mo r at or i um of 1 8 d a y s w i ll begin whe r e no l e g al action on de b ts and as s e ts w ould be p er m i s s i ble. In the Inso l v ency R e s o l ution P r oces s , the c r edi t o r s and the de b t or w i l l en g a g e in neg o ti a tions t o arr i v e a t an ag r eeable r ep a yme n t plan f or c ompos i tion of the de b ts and a f f ai r s of the d e b t o r , supe r v i sed b y a r eso l ution p r o f es s ional. The r ep a yme n t plan w i l l r equi r e app r o v al of a th r e e - f ourth m ajor i ty of c r edi t o r s in v alue. The r ep a ym e n t plan m a y author i z e or r equi r e the r e s o l ution p r o f e s s i onal t o: (a) c arry on the de b t or ' s busine s s or t r ade on his b e h alf or i n h i s na m e; or (b) r ea li z e the as se t s of the de b t or; or ( c ) ad m i ni s t er or di spose of a n y funds of the de b t o r . The r ep a yme n t plan w i l l be imp l e m e nt ed in supe r v i s i on of the inso l v ency p r o f es s ional.

63. Ba n krup t cy P r oce s s The ban k ru p t cy of an ind i vidual c an be in i t i a t ed only a f t er the f ai l u r e of t h e r eso l ut i on p r ocess or no n -im p leme n t a t i on of r ep a yme n t plan. The ban k ru p t cy tr u st ee i s r es p ons i ble f or adm i ni s t r a t i on of the e st a t e of the bankr up t and f or d i s tr i bution of t he p r oceeds on the bas i s of t he prior i t y .

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