LATEST AMENDMENTS IN INSOLVENCY AND BANKRUPTCY CODE PRESENTED BY: MUKESH KUMAR MITTAL B.COM., FCA, IP (IBBI) THROUGH WEBINAR ON 08-04-2020 AT 11:00AM HOSTED BY : PANIPAT BRANCH OF NIRC OF ICAI Disclaimer: Please note that this presentation is based on the limited information available with us. While every care has been taken to ensure accuracy of this presentation, CA Mukesh Kumar Mittal shall not assume any liability / responsibility for any errors that might creep in. The material herein does not constitute / substitute professional advice that may be required before acting on any matter. Without our prior written consent, this presentation shall not be quoted in whole or in part or otherwise referred to in any document or delivered to any other person or entity.
INSOLVENCY AND BANKRUPTCY CODE, 2016 AS THE NAME SUGGEST THE LAW IS APPLICABLE FOR INSOLVENCY AND BANKRUPTCY PROCESS. THE INSOLVENCY AND BANKRUPTCY ARE TWO DIFFERENT TERMS: One can be insolvent without being bankrupt, but One can’t be bankrupt without being insolvent. CODE : “Code” is usually known as a collection or compendium of laws. It refers to a systematic and comprehensive compilation of laws, rules or regulations that are consolidated and classified according to a particular subject matter. INSOLVENCY : Insolvency is the inability to pay debts when they are due. Fortunately, there are solutions for resolving insolvency, including borrowing money or increasing income so that you can pay off debt. You also could negotiate a debt payment or settlement plan with creditors. Insolvency is a state of economic distress. BANKRUPTCY : Bankruptcy is usually a final alternative when other attempts to clear debt fail. Bankruptcy is a court order that decides how an insolvent debtor will deal with unpaid obligations. LIQUIDATION : Liquidation is a process of winding up of a corporation or an incorporated entity. It may be Voluntary Liquidation or Compulsory Liquidation. Voluntary Liquidation is possible only when the debtor is solvent or it is in the position to pay all its creditors. On the other hand when a company is unable to pay its debts and there is no resolution plan of the company then there will be compulsory Liquidation. Journey of IBC Amendments IBC comes into effect in December, 2016 and was made operational to corporate debtors. First time amendment on 23-11-2017 through Ordinance, which was later converted into act on 18 th January 2018. Second time amendment on 06-06-2018 again through Ordinance, which was later converted into act on 17 th August 2018. Third time Amendments were made on 16-08-2019 vide Insolvency and Bankruptcy Code (Amendment) Act, 2019 Fourth time On 12-12-2019 Insolvency and Bankruptcy Code (Second Amendment) Bill, 2019 was introduced in Lok Sabha. However the Bill could not be passed in winter session of Parliament as Parliament adjourned sine die on 13-12-2019. Hence Insolvency and Bankruptcy Code (Amendment) Ordinance, 2019 has been issued on 28-12-2019, which has later converted into act on 13 th March 20. The provisions relating to applicability of code to Personal Guarantors of Corporate Debtor notifies w.e.f. 01-12-2019.
FIRSTLY, WE WILL DISCUSS ABOUT SOME TERMS USED IN THE CODE. Board (IBBI) : The Insolvency and Bankruptcy Board of India established under the code. Adjudicating Authority (AA): “Adjudicating Authority”, for the purposes of this Part, means National Company Law Tribunal constituted under section 408 of the Companies Act, 2013 (18 of 2013). Operational Creditor (OC) : “operational creditor” means a person to whom an operational debt is owed and includes any person to whom such debt has been legally assigned or transferred. Financial Creditor (FC) : “financial creditor” means any person to whom a financial debt is owed and includes a person to whom such debt has been legally assigned or transferred to. Corporate Debtor (CD) : “corporate debtor” means a corporate person who owes a debt to any person. Corporate Guarantor : “corporate guarantor” means a corporate person who is the surety in a contract of guarantee to a corporate debtor. Claim : “claim” means – (a) a right to payment, whether or not such right is reduced to judgment, fixed, disputed, undisputed, legal, equitable, secured, or unsecured; (b) right to remedy for breach of contract under any law for the time being in force, if such breach gives rise to a right to payment, whether or not such right is reduced to judgment, fixed, matured, unmatured, disputed, undisputed, secured or unsecured; Debt : “debt” means a liability or obligation in respect of a claim which is due from any person and includes a financial debt and operational debt. Default : “default” means non-payment of debt when whole or any part or instalment of the amount of debt has become due and payable and is not 1 [paid] by the debtor or the corporate debtor, as the case may be. Dispute : “dispute” includes a suit or arbitration proceedings relating to– (a) the existence of the amount of debt; (b) the quality of goods or service; or (c) the breach of a representation or warranty Information Utility (IU) : “information utility” means a person who is registered with the Board as an information utility under section 210.
Insolvency Professional (IP) : “insolvency professional” means a person enrolled under section 206 with an insolvency professional agency as its member and registered with the Board as an insolvency professional under section 207. Insolvency Professional Agency (IPA) : “insolvency professional agency” means any person registered with the Board under section 201 as an insolvency professional agency. Personal Guarantor : “personal guarantor” means an individual who is the surety in a contract of guarantee to a corporate debtor. Resolution Applicant : "resolution applicant" means a person, who individually or jointly with any other person, submits a resolution plan to the resolution professional pursuant to the invitation made under clause (h) of sub-section (2) of section 25. Resolution Plan : “resolution plan” means a plan proposed by 2 [ resolution applicant] for insolvency resolution of the corporate debtor as a going concern in accordance with Part II Impact on other statutes Repealed Acts Presidency Town Insolvency Act, 1909; and Provisional Insolvency Act, 1920 Some of the amended Acts Sick Industrial Companies (Special Provisions) Repeal Act, 2003; Recovery of Debts Due to banks and financial institutions Act, 1993; Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002; and Companies Act, 2013 Applicability, Scope & Structure Applicability All kinds of: - Corporate Enterprises; - Limited Liability Partnerships; - Partnership Firms; and - Individuals. Scope - Insolvency; - Liquidation;
- Voluntary Liquidation (solvent insolvency); and - Bankruptcy Structure In entirety, the Code has 255 sections which are divided into 5 Parts as given below: Part I (Section 1 to 3) Preliminary (Definitions) Part II (Section 4 to 77) Insolvency Resolution and Liquidation for Corporate Persons Part III (Section 78 to 187) Insolvency Resolution and Bankruptcy for individuals and Partnership Firms Part IV (Section 188 to 223) Regulation of Insolvency Professionals, Agencies and Information Utilities Part V (Section 224 to 255) Miscellaneous (enables amendments in other statues such as Companies Act 2013) Schedules (12 Schedules) Provides for amendments to be carried out in other statues Framework of the Code Regulator Insolvency and Bankruptcy Board of India (IBBI) Insolvency Professional Agencies; Insolvency Professionals; and Information Utilities Adjudicator National Company Law Tribunal Debt Recovery Tribunal Corporate Entities Non-Corporate Entities Companies/LLPs Individuals and Partnership Firms
Broad CIRP-Process Admission of application and appointment of Interim Resolution Professional Collation of claims and constitution of committee of creditors by Interim Resolution Professional Appointment of Resolution Professional in the creditors meeting held within 7 days of constitution of committee of creditors Resolution Professional to prepare Information Memorandum Resolution Applicant to prepare (on the basis of Information Memorandum) and submit resolution plan to Resolution Professional for examination & further submission for approval of committee of creditor Resolution plan approved by committee Resolution plan rejected by committee NCLT approves plan NCLT rejects plan Liquidation process starts
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