Four Pillars of the Insolvency & Bankruptcy Code
- The adjudicating authority (‘AA’) for the proceedings of the resolution process for companies shall be the National Companies Law Tribunal (‘NCLT’), for companies.
- Duties - approval to initiate the resolution process, appoint the insolvency professional, and approve the final decision of creditors.
The Insolvency and Bankruptcy Board,
- The Insolvency and Bankruptcy Board (‘Board’) will be a 10 member committee which shall consist of representatives of RBI, and the Ministries of Finance, Corporate Affairs and Law.
- Duties - (i) registering and regulating IPAs, IPs and IUs, and (ii) governing (by prescribing regulations and guidelines) the conduct of insolvency/ bankruptcy resolution processes under the Code.
Insolvency Professional Agency (IPA)
- The Insolvency Professional Agency is an entity registered with the Board, responsible for professional development of IPs.
- Duties- The agency shall conduct examinations to certify the insolvency professionals and enforce a code of conduct for their performance (as per there bye-laws).
Insolvency Professional (IP)
- A specialized cadre of professionals enrolled as a member in an IPA and registered with the Board.
- Duties - These professionals will administer the resolution process, manage the assets of the debtor, and provide information for creditors to assist them in decision making
Information Utilities (IU)
- Information Utilities registered with the board shall collect, collate, authenticate and disseminate financial information from any person including the financial and operational creditors of companies.
- It shall maintain details of assets and liabilities of corporate debtors (along with their defaults and discharges).
Who may initiate Insolvency Resolutions Process?
- Financial Creditors are those whose relationship with the entity is a pure financial contract, such as loan or a debt security – loan / debt contracts.
- Operational Creditors are those whose liability from the entity comes from a transaction on operations – trade creditors, employees, utilities.
Corporate Debtor Itself
- Corporate Debtor means a company or an LLP who owes a debt to any person.
Whatr are the Importants Aspets of IBC
Moratorium Order by Adjudicating Authority = Cooling Period
- Institution of suits or continuation of pending suits or execution of any judgement, decree or order in any court of law.
- Transferring any of its assets.
- Proceeding or action under SARFAESI Act, 2002.
- Manage the affairs of the corporate as a going concern,
- Collect all information relating to assets, finances and operations to determine financial position,
- Receive and collate all the claims,
- Take control and custody of any assets (whether in India or outside India) other than the assets of Indian or foreign subsidiary
- Enter into contract for and on behalf of the Company or amend any existing contracts, etc.
- To raise interim finance.
Committee of Creditors
- Consist of only financial creditors.
- First meeting to be held within 3 days
- All the decisions will be decided by 75% of the financial creditors in value.
- Prior approval is required for raising funds, Creation of security on any assets, Change of capital structure in any manner, Change of any Ownership of the company, Undertaking of any related party transaction, Change in MOA or AOA, ETC
- Approved by the committee of creditors and then, by insolvency resolution professional.
- Finally, the plan will be approve the adjudicating authority.
- The resolution plan will be binding on the company, its employees, members, creditors, guarantors and other stakeholders.
- If not approved, or ready, within 180 days or adjudicating authority rejects, the liquidation order will be passed.