By: CA Kamal Garg [B. Com (H), FCA, DISA (ICAI)] - PowerPoint Presentation

1. By:CA Kamal Garg[B. Com (H), FCA, DISA (ICAI)]Insolvency Professional

2. Framework of IBC, 2016

3. The framework of Part II - Insolvency Resolution and Liquidation for Corporate Persons

4. INVOKING PROVISIONS OF CODEDEFAULTIn case of Co. & LLPIn case of Partnership & IndividualMinimum amount of ` 1 lakhMinimum amount of ` 1 thousandMinimum amount of ` 1 lakh & ` 1 thousand can be increased upto ` 1 Cr & ` 1 lakh respectively by CGWhere any Company or LLP commits-A default in paying itsFinancial debtOperational debtThen a financial creditor/ operational creditor/ Company & LLP itselfMay file an application, for initiating corporate insolvency resolution process with the Adjudicating Authority.

5. WHO CAN INVOKE

6. Adjudicating Authority NCLT - Deal with insolvency matters of Co. & LLP - Appeal to NCLATDebt Recovery TribunalDeal with insolvency matters of individual & Partnership firmAppeal as to DRAT Adjudicating Authority within 14 days of receipt of application, by an order -Admit the applicationReject the applicationIf it is completeIf it is incompleteAdjudicating Authority shall before rejecting application on grounds of incompleteness, give notice to applicant to rectify defects in application within 7 days from the date of receipt of such noticeNOTICE OF REJECTIONGROUNDS FOR REJECTIONDefault has not occurredTrigger Point for filing of application by Operational Creditor:After the expiry of 10 days from the date of delivery of the demand notice or invoice demanding the payment, if operational creditor does not receive payment or notice of the dispute from the corporate debtorDate of commencement of CIRP: from the date of admission of the application 

7. TIME LINE180 days45 days (One time)270 daysAdjudicating Authority after admission of application shall, by an order Declare a MoratoriumCause a Public AnnouncementAppoint Interim Resolution ProfessionalFAST TRACK :90 days90 days (Maximum)135 days

8. MORATORIUM EFFECT – S. 14Adjudicating Authority shall by order prohibit the following:Institution/continuation/proceedings of suits including execution of any judgment, decree or order in any Court/ tribunal/ arbitration panel/ other authorityTransferring, encumbering, alienating or disposing of its assets/legal right/beneficial interestAny action to Foreclose, Recover or enforce any security interest created including any action under SARFAESI Act, 2002Recovery of any property by owner or lessor where such property is occupied Note: The supply of essential goods or services to the corporate debtor as may be specified shall not be terminated or suspended or interrupted during moratorium period – E, W, T, IT to the extent these are not a direct input to the output produced or supplied by the corporate debtor.Moratorium will not apply to guarantors (surety):There were conflicting judgments of NCLT and NCLAT whether the moratorium applies to guarantors of corporate debtor as well;Now, it is made clear that the moratorium will not apply to surety (guarantors) of Corporate Debtors – section 14(3)(b) of Insolvency Code inserted w.e.f. 6-6-2018.Thus, recovery proceedings, insolvency resolution process or bankruptcy proceedings against surety (guarantor) can be initiated even if moratorium is granted to corporate debtor.

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10. Three tier structure

11. Management of the corporate entity powers of the board of directors shall stand suspended and be exercised by the interim RP;officers and managers of the corporate debtor shall report to the interim RP and provide access to such documents and records;financial institutions maintaining accounts of the corporate debtor shall act on the instructions of the interim RP in relation to such accounts and furnish all information;IRP has the authority to access the books of account, records and other relevant documents of corporate debtor available with government authorities, statutory auditors, accountantsThere is no decided structure for the Interim RP professional fee and it is a matter of negotiation between the applicant and the Interim RP. Therefore, it would be appropriate for the Interim RP to get clear mandate regarding his fees and other expenses to be incurred by the Interim RP and get consent to reimburse the same by the applicant from time to time.Section 19 of the Code casts obligations on the personnel of the corporate debtor, its promoters or any other person associated with the management of the corporate debtor to extend all assistance and cooperation to the IRP as may be required by him in managing the affairs of the corporate debtor and in case of default, the Interim RP may make an application to the Adjudicating Authority for necessary directions;Regulation 30 of the IBBI (Insolvency Resolution Process for Corporate Persons) Regulations, 2016 provides that the IRP may make an application to the Adjudicating Authority for an order seeking the assistance of the local district administration in discharging his duties under the Code or these Regulations.

12. Duties of IRPCollect all information relating to the assets, liabilities, finances and operations of the corporate debtor for determining the financial position of the corporate debtor;Receive and collect all the claims submitted to him, pursuant to the public announcements;Constitute a committee of creditors [CoC];Take control and custody of any asset over which the corporate debtor has ownership rights

13. Powers of IRP for management of operations of the entity as going concernSection 20 casts an obligation on the interim RP to make every endeavor to protect and preserve the value of the property of the corporate debtor and manage the operations of the corporate debtor as a going concern;appoint accountants, legal or other professionals as may be necessary;Enter/ amend/ modify contracts on behalf of the corporate debtor;raise interim finance;take all such actions as are necessary to keep the entity as a going concern;Regulation 27 of the IBBI (Insolvency Resolution Process for Corporate Persons) Regulations, 2016 provides that the interim RP shall within 7 days of his appointment, appoint two registered valuers to determine the liquidation value

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15. Section/ RegulationDescription of ActivityNormLatest TimelineSection 16(1)Commencement of CIRP and appointment of IRP….TRegulation 6(1)Public announcement inviting claimsWithin 3 Days of Appointment of IRPT+3Section 15(1)(c)/ Regulations 6(2)(c) and 12 (1)Submission of claimsFor 14 Days from Appointment of IRPT+14Regulation 12(2)Submission of claimsUp to 90th day of commencementT+90

16. Section/ RegulationDescription of ActivityNormLatest TimelineRegulation 13(1)Verification of claims received under regulation 12(1)Within 7 days from the receipt of the claimT+21Verification of claims received under regulation 12(2)T+97Section 21(6A) (b)/ Regulation 16AApplication for appointment of ARWithin 2 days from verification of claims received under regulation 12(1)T+23Regulation 17(1)Report certifying constitution of CoCT+23

17. Section/ RegulationDescription of ActivityNormLatest TimelineSection 22/ Regulation 19(2)1st meeting of the CoCWithin 7 days of filing of report certifying the constitution of the CoC, but with 5 days' noticeT+30Section 22(2)Resolution to appoint RP by the CoCIn the first meeting of the CoCT+30Section 16(5)Appointment of RPOn approval by the AA….Regulation 17(3)IRP performs the functions of RP till the RP is appointedIf RP is not appointed by 40th day of commencementT+40Regulation 27Appointment of valuerWithin 7 days of appointment of RP, but not later than 47th day of commencementT+47

18. Section/ RegulationDescription of ActivityNormLatest TimelineSection 12(A)/ Regulation 30ASubmission of application for withdrawal of application admittedBefore issue of EoIWCoC to dispose of the applicationWithin 7 days of its receipt or 7 days of constitution of CoC, whichever is laterW+7Filing application of withdrawal, if approved by CoC with 90% majority voting, by RP to AAWithin 3 days of approval by CoCW+10

19. Section/ RegulationDescription of ActivityNormLatest TimelineRegulation 35ARP to form an opinion on preferential and other transactionsWithin 75 days of the commencementT+75RP to make a determination on preferential and other transactionsWithin 115 days of commencementT+115RP to file applications to AA for appropriate reliefWithin 135 days of commencementT+135

20. Section/ RegulationDescription of ActivityNormLatest TimelineRegulation 36 (1)Submission of IM to CoCWithin 2 weeks of appointment of RP, but not later than 54th day of commencementT+54Regulation 36APublish Form G – EOIWithin 75 days of commencementT+75Submission of EoIAt least 15 days from issue of EoI T+90Provisional List of RAs by RPWithin 10 days from the last day of receipt of EoIT+100Submission of objections to provisional listFor 5 days from the date of provisional listT+105Final List of RAs by RPWithin 10 days of the receipt of objectionsT+115

21. Section/ RegulationDescription of ActivityNormLatest TimelineRegulation 36BIssue of RFRP, including Evaluation Matrix and IMWithin 5 days of the issue of the provisional listT+105Receipt of Resolution PlansAt least 30 days from issue of RFRPT+135Regulation 39(4)Submission of CoC approved Resolution Plan to AAAs soon as approved by the CoCT+165Section 31(1)Approval of resolution plan by AAT=180

22. INTERIM RESOLUTION PROFESSIONALSAPPOINTMENT:Appointment by Adjudicating Authority within 14 days from Admission of Application Shall not exceed 30 days from date of AppointmentTENURE:

23. PUBLIC ANNNOUNCEMENTPublic announcement contain following information: Name & address of defaulted Corp. DebtorName of Registrar with which Corp. Debtor is incorporated or registeredLast date for submission of Claims Details of Interim Resolution Professional - Management of Corporate Debtors - Responsible for Receiving claims Penalties for False or Misleading Claims Date on which the Insolvency Resolution Process close (i.e. 180 days from the date of admission of application) Public Announcement shall be made in such manner as may be specified

24. RESOLUTION PLANPreparation of Information Memorandum for formulating a Resolution PlanProviding to Resolution Applicant access to all relevant informationResolution Applicant will submit a Resolution Plan to the Resolution Professional prepared as per Information Memorandum Examination of Resolution Plan Presentation of RP to CoC for ApprovalSubmitting Resolution Plan to Adjudicating AuthorityAdjudicating Authority may by order approve the Resolution Plan; Moratorium Period endsRP will be binding on the Corp. Debtor, its Employees, Members, Creditors, Guarantors & other StakeholdersIf Resolution Plan: Not ready within 180 days or Adjudicating Authority rejects the Resolution PlanIt will pass a Liquidation Order RP will act as a Liquidator and all the powers of the Board of Directors will vest with the Liquidator

25. NEW INSTITUTIONS

26. 66%

27. PRIORITY

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29. Question 1: Whether on occurrence of default in repayment to creditor, insolvency resolution process against guarantor could be initiated;Question 2: where corporate applicant was declared sick by BIFR and notice was issued on it under SARFAESI Act and applications of banks were pending before DRT, whether application for initiating insolvency petition can be admitted;Question 3: Moratorium under the Bankruptcy and Insolvency Code - Impact on Proceedings for Cheque Dishonour

30. Question 4: Personal properties of promoters given as a “Security” to Banks – whether subjected to moratorium;Question 5: Whether Limitation Act, 1963 apply on Bankruptcy Code, and, therefore, application by financial creditor to initiate insolvency process even after 6 years could be said to be time barred;Question 6: Whether disputes raised by corporate debtor in reply to notice are sustainable and, therefore, petition for initiation of Corporate Insolvency Resolution process by operational creditor cannot be admitted

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32. ET, 29th Aug, 2017

33. Insolvency professionals face threats, draw staff ire while evaluating plans for debt-laden companies – ET, 24th August, 2017 

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37. Scope

38. Thank YouCA Kamal Garg[B. Com (H), FCA, DISA (ICAI)]Insolvency Professionalcakamalgarg@gmail.com, 9811054015