The Code provides lenders with a mechanism to initiate an insolvency resolution process in the event a debtor is unable to pay its debts. A debtor company may also, by itself, take recourse to the Code if it wants to avail of the mechanism of revival or liquidation. In the event of inability to pay lenders, a company may choose to go for insolvency resolution process – a measure by which the company can itself approach the NCLT for the purpose of revival or liquidation. Finally, a company can also take recourse to the Code, if it wants to exit from the business, a company can choose to go for voluntary liquidation process provided the value of assets can set off the liabilities of the company.
The Code allows the lenders to initiate an insolvency resolution process, if the amount of default by the debtor is at least one lakh rupees. Presently, it is Rs. One Crore.
Supply of critical goods and services not to be discontinued
Any existing license, permit, registration, or clearance given by any government authority to the debtor will not be suspended or terminated due to insolvency
The company will not be liable for any offence committed prior to the commencement of the insolvency resolution process.
A person to whom a financial debt is owed against consideration for time value of money. Financial creditors are those whose relationship with the entity is a pure financial contract, such as a loan or debt security.
A person to whom an operational debt is owed on account of goods or services including workman and govt. dues/. Operational creditors are those whose liability from the entity comes from a transaction on operations.
National Company Law Tribunal, having territorial jurisdiction over the place where the registered office of the corporate person is located serves as the Adjudicating Authority, in relation to insolvency resolution and liquidation for corporate persons.
The documents required include a record of default recorded with information utility or other record or evidence of default as specified and the name of the proposed interim resolution professional.
Yes. It can be withdrawn either before admission by the Adjudicating Authority or even after admission. The Adjudicating Authority may allow withdrawal of application admitted under section 7 or section 9 or section 10, on an application made by the applicant through the resolution professional, with the approval of 90 percent of voting share of the committee of creditors. The application for withdrawal may also be made by the applicant through interim resolution professional even before the constitution of committee of creditors.
After admission of CIRP by the Adjudicating Authority, an interim resolution professional makes a public announcement in Form A within three days from his appointment and calls for submission of claims from the stakeholders.