Tag Archives: insolvency law

committee of creditors

IBBI circular dated 16th April, 2021 on the subject of matters to be considered by the committee of creditors on request by members of the committee. Read on.

Regulation 18 of the IBBI (Insolvency Resolution Process for Corporate Persons) Regulations,
2016 (CIRP Regulations) provides that a resolution professional (RP) may convene a meeting
of the committee of creditors (CoC), when he considers it necessary. He shall, however,
convene a meeting of the CoC, if a request to that effect is made by members of the CoC
representing 33% of the voting rights.

  1. Regulation 19 of the CIRP Regulations requires a notice in writing for calling a meeting of
    the CoC. Regulation 21 requires that the notice for a meeting of the CoC shall contain a list of
    matters to be discussed, the list of issues to be voted, and copies of all documents relevant to
    the matters to be discussed and issues to be voted upon at the meeting.
  2. It is clear from a joint reading of the provisions of regulations 18, 19 and 21 of the CIRP
    Regulations that members of the CoC having 33% of the voting rights may request the RP to
    convene a meeting of the CoC. Such request shall include a note proposing the matters to be
    discussed or issues to be voted upon, along with relevant documents, if any. On receipt of the
    request, the RP shall convene a meeting of the CoC for consideration of the note. These
    provisions envisage the following situations:

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insolvency process of personal guarantor

IBBI has issued a circular dated 2nd February, 2021 wherein they have made an online process for submitting application for initiation of insolvency resolution process of a personal guarantor to a corporate debtor. This application is filed under section 94(1) or 95(1) of the Insolvency and Bankruptcy Code 2016.

On making an application online, the applicant shall get an acknowledgement.

This is one more step of making all applications online by the government.

The application can be made online at this site i.e.

https://ibbi.gov.in/intimation-applications/iaaa-personal-one

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insolvency professional

MCA has issued circular on 17th February, 2020 authorising the Insolvency Professional (Interim Resolution Professional or Resolution Professional or Liquidator) to file all the forms of a company after it has been admitted into the insolvency process.

Gist of circular follows:

Several requests have been received in the Ministry with respect to filing of documents in the MCA-2 1 registry where an Insolvency Professional (lnterim Resolution Professional (lRP) or Resolution Professional (RP) or Liquidator) has been appointed under IBC, 2016 in respect of a company. Keeping in view the requirements for statutory compliances by such companies under the Companies Act, 2013 and to enable compliance of such requirements by such Resolution Professionals, it is hereby clarified that the following procedures shall be followed in respect of all such cases:-

i) The IRP/ RP/ Liquidator would have to first file the NCLT order approving him as the IRP/RP/Liquidator in form INC-28 on the MCA21 portal by selecting the option “Others” at serial no. s(a)(i) from the drop down menu in the form. After filling in the form, the IRP/RP/Liquidator while affixing his DSC, shall choose his designation as “Others” in the declaration box.

ii) Jurisdictional ROC, shall thereafter examine and approve the INC-28 form so filed if the same is found to be in order. If the filed Form is not in order, he shall mark the form as under Re-submission / Rejected category as applicable. Once the INC-28 form is approved, only the IP (lRP/ RP/ Liquidator) shall thereafter be allowed to file any form on behalf of the company. For all subsequent filings, the IP shall choose his designation as “Chief Executive Officer”(CEO), for the purpose of filing e-forms, in various e-forms.

iii) The Master Data for the company shall, after the approval of Form No.INC28 clearly display that the said company is under CIRP or Liquidation, as the case may be, and the name of the IP so appointed shall be displayed in the CEO column.

iv) The IP shall be responsible and will be able to file all necessary documents/ disclosures/ returns for the purposes of compliances under the Companies Act. 2013.

v) For filing e-forms SH-8 and SH-9 and iXBRL, the IP shall be allowed to file the same in his role as CEO instead of the form being signed by two Directors. In respect of e-form MGT-7 the IP shall sign the form instead of a Director and thereafter the form would have to be certified by a Company Secretary in practice.

vi) Unless INC-28 e-form is approved, no other forms would be enabled for filing by the IRP/RP/Liquidator in his role of designated CEO. The IRP/RP/Liquidator in his role as designated CEO shall again file e-form INC-28 upon the approval of the resolution plan, initiation of liquidation proceedings or upon withdrawal of the application for CIRP based on which the status of the company would get suitably reflected in the company
master data.

vii) In case, a new Board is required to be appointed in terms of the order passed by the Tribunal or Appellate Tribunal, the details of the first authorised signatory of such board will be inserted by the jurisdictional Registrar after receiving an application from the IP, wherein the SRN of the relevant e-from INC-28 shall be quoted. Consequently, the authorisation for the IP to file documents on behalf of the company shall then cease and the new authorised signatory shall then take over the responsibility of filing e-forms on behalf of the company.

viii) lt is further clarified that in case the order of admission of a company (corporate Debtor) into CIRP or into liquidation is stayed or set aside by the Tribunal or Appellate Tribunal or other courts, such order shall be filed in Form INC-28 by the concerned IP, and the status of the company and the authorisation for filing of forms on behalf of company would then change accordingly.

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Insolvency Resolution Process for Corporates

The Insolvency and Bankruptcy Board of India (IBBI) has amended the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016 and Insolvency and Bankruptcy Board of India (Fast Track Insolvency Resolution Process for Corporate Persons) Regulations, 2017 on 5th October, 2017. According to the Amended Regulations, a Resolution Plan shall include a statement as to how it has dealt with the interests of all stakeholders, including financial creditors and operational creditors, of the Corporate Debtor.

The Amendments are available at www.mca.gov.in and www.ibbi.gov.in.

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Revamp of Bankruptcy Laws in India

PIB Press Release dated 4th November 2015

Summary of the Recommendations of the Bankruptcy Law Reforms Committee (BLRC)  

Following is the Summary of the Recommendations of the Bankruptcy Law Reforms Committee (BLRC)

The Report of the BLRC is in two parts:

  1. Rationale and Design/Recommendations;
  2. A comprehensive draft Insolvency and Bankruptcy Bill covering all entities.

The draft Bill has consolidated the existing laws relating to insolvency of companies, limited liability entities (including limited liability partnerships and other entities with limited liability), unlimited liability partnerships and individuals which are presently scattered in a number of legislations, into a single legislation. The committee has observed that the enactment of the proposed Bill will provide greater clarity in the law and facilitate the application of consistent and coherent provisions to different stakeholders affected by business failure or inability to pay debt and will address the challenges being faced at present for swift and effective bankruptcy resolution. The Bill seeks to improve the handling of conflicts between creditors and debtors, avoid destruction of value, distinguish malfeasance vis-a-vis business failure and clearly allocate losses in macroeconomic downturns.

The major recommendations of the Report are as follows:

  1. Insolvency Regulator: The Bill proposes to establish an Insolvency Regulator to exercise regulatory oversight over insolvency professionals, insolvency professional agencies and informational utilities.
  2. Insolvency Adjudicating Authority: The Adjudicating Authority will have the jurisdiction to hear and dispose of cases by or against the debtor. 
  1. The Debt Recovery Tribunal (“DRT”) shall be the Adjudicating Authority with jurisdiction over individuals and unlimited liability partnership firms. Appeals from the order of DRT shall lie to the Debt Recovery Appellate Tribunal (“DRAT”).
  1.  The National Company Law Tribunal (“NCLT”) shall be the Adjudicating Authority with jurisdiction over companies, limited liability entities. Appeals from the order of NCLT shall lie to the National Company Law Appellate Tribunal (“NCLAT”).
  2.  NCLAT shall be the appellate authority to hear appeals arising out of the orders       passed by the Regulator in respect of insolvency professionals or information utilities.

iii.                Insolvency Professionals: The draft Bill proposes to regulate insolvency professionals and insolvency professional agencies. Under Regulator’s oversight, these agencies will develop professional standards, codes of ethics and exercise a disciplinary role over errant members leading to the development of a competitive industry for insolvency professionals.

  1. Insolvency Information Utilities: The draft Bill proposes for information utilities which would collect, collate, authenticate and disseminate financial information from listed companies and financial and operational creditors of companies. An individual insolvency database is also proposed to be set up with the goal of providing information on insolvency status of individuals.
  2. Bankruptcy and Insolvency Processes for Companies and Limited Liability Entities: The draft Bill proposes to revamp the revival/re-organisation regime applicable to financially distressed companies and limited liability entities; and the insolvency related liquidation regime applicable to companies and limited liability entities.
  1. The draft Bill lays down a clear, coherent and speedy process for early identification of financial distress and revival of the companies and limited liability entities if the underlying business is found to be viable.
  2. The draft Bill prescribes a swift process and timeline of 180 days for dealing with applications for insolvency resolution. This can be extended for 90 days by the Adjudicating Authority only in exceptional cases. During insolvency resolution period (of 180/270 days), the management of the debtor is placed in the hands of an interim resolution professional/resolution professional.
  3. An insolvency resolution plan prepared by the resolution professional has to be approved by a majority of 75% of voting share of the financial creditors. Once the plan is approved, it would require sanction of the Adjudicating Authority. If an insolvency resolution plan is rejected, the Adjudicating Authority will make an order for the liquidation.
  4. The draft Bill also provides for a fast track insolvency resolution process which may be applicable to certain categories of entities. In such a case, the insolvency resolution process has to be completed within a period of 90 days from the trigger date. However, on request from the resolution professional based on the resolution passed by the committee of creditors, a one-time extension of 45 days can be granted by the Adjudicating Authority. The order of priorities [waterfall] in which the proceeds from the realisation of the assets of the entity are to be distributed to its creditors is also provided for.
  1.             Bankruptcy and Insolvency Processes for Individuals and Unlimited Liability Partnerships:The draft Bill also proposes an insolvency regime for individuals and unlimited liability partnerships also. As a precursor to a bankruptcy process, the draft Bill envisages two distinct processes under this Part, namely, Fresh Start and Insolvency Resolution.
  2.               In the Fresh Start process, indigent individuals with income and assets lesser than specified thresholds (annual gross income does not exceed Rs. 60,000 and aggregate value of assets does not exceed Rs.20,000) shall be eligible to apply for a discharge from their “qualifying debts” (i.e. debts which are liquidated, unsecured and not excluded debts and up to Rs.35,000). The resolution professional will investigate and prepare a final list of all qualifying debts within 180 days from the date of application. On the expiry of this period, the Adjudicating Authority will pass an order on discharging of the debtor from the qualifying debts and accord an opportunity to the debtor to start afresh, financially.
  1.             In the Insolvency Resolution Process, the creditors and the debtor will engage in negotiations to arrive at an agreeable repayment plan for composition of the debts and affairs of the debtor, supervised by a resolution professional.
  1. The bankruptcy of an individual can be initiated only after the failure of the resolution process. The bankruptcy trustee is responsible for administration of the estate of the bankrupt and for distribution of the proceeds on the basis of the priority.

vii.   Transition Provision: The draft Bill lays down a transition provision during which the Central Government shall exercise all the powers of the Regulator till the time the Regulator is established. This transition provision will enable quick starting of the process on the ground without waiting for the proposed institutional structure to develop.

      viii.             Transfer of proceedings: Any proceeding pending before the AAIFR or the BIFR under the SICA, 1985, immediately before the commencement of this law shall stand abated. However, a company in respect of which such proceeding stands abated may make a reference to Adjudicating Authority within 180 days from the commencement of this law

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