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Insolvency, resolution and liquidation for corporate persons

Anjali Gorsia 
on 24 June 2017

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In this article, the author specifically discusses about the Section 4 to 32 of Chapter I of Part II of the Insolvency and Bankruptcy Code, 2016 dealing with INSOLVENCY AND RESOLUTION AND LIQUIDATION FOR CORPORATE PERSONS.

This part of the code deals with the insolvency resolution and liquidation of 'CORPORATE PERSONS' which is defined under section 3(7); means

- A Company defined in section 2(20) of the Companies Act, 2013,
- A limited liability partnership in section 2(1)(n) of LLP Act, 2008 or
- Any other person incorporated within limited liability under law for the time being in force but shall not include any financial provider;

Note: Insolvency resolution and liquidation of financial services providers are excluded from the scope of this Act. This is because such entities require a special insolvency regime that is specialized. Example; underwriters, Insurance Companies, banks etc.

Note that it is possible to incorporate an unlimited liability company under the Companies Act, 2013

(Trick: Corporate Insolvency Resolution Process=CIRP)
WHAT is the minimum amount default required for initiation of CIRP process against Corporate Debtor (CD)?

SECTION 4: CIRP against of Corporate Debtor can be initialed where the minimum amount of DEFAULT is One lakh Rupees (Rs. 1, 00,000/-) of debt. However, the Central Government may specify the minimum amount of default of higher value up to one crore rupees.

Where Section 3(12): "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 repaid by the debtor or the corporate debtor, as the case may be;

STEPS INVOLVED IN EXECUTION OF CORPORATE INSOLVENCY RESOLUTION PROCESS

1. Application for CIRP
2. Action of Adjudication Authority (AA) on receipt of Application
3. Declaration of moratorium Period
4. Appointment of Interim Resolution Professional
5. Public Announcement & meeting submissions of claims
6. Verification of Determination of Claims
7. Constitution of Committee of Creditors
8. Issuance of Notice of the Meeting of Committee of Creditors
9. Holding meeting of Creditors of Committee
10. Appointment of Resolution Professional
11. Preparation of information of Memorandum
12. Preparation Of Resolution Plan
13. Submission of resolution plan by the applicant to Resolution Professional
14. Submission of resolution Plan to AA

When Application for CIRP can be filed?

SECTION 6; An application can be filed by following person , when Corporate Debtor has defaulted in paying debt that has become due and payable, but not repaid;

- Financial Creditor or
- Operation Creditor or
- Corporate Applicant itself (includes corporate debtor)

Where,


Section 5(7):

Section 5(20):

Section 5(5)::

Section 3(8):

"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;

"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;

"corporate applicant" means -

(a) corporate debtor; or

(b) a member or partner of the corporate debtor who is authorized to make an application for the corporate insolvency resolution process under the constitutional document of the corporate debtor; or

(c) an individual who is in charge of managing the operations and resources of the corporate debtor; or

(d) a person who has the control and supervision over the financial affairs of the corporate debtor;

"corporate debtor" means a corporate person who owes a debt to any person


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