INSOLVENCY AND BANKRUPTCY CODE, 2016 OVERVIEW OF IBC,2016 AND OPPORTUNITIES TO PROFESSIONALS SUNEEL KUMAR MANNEM B.COM.,ACMA PRACTICING COST ACCOUNTANT NEED Insolvency Resolution World Bank Rankin g 160
140 120 100 80 60 136 40 55 27 st ra l ia Ch in a US A
ga po ia Si n UK 5 0 13 Au 1 re
20 In d Existing Mechanism Inadequate & Ineffective : No single Law dealing with IB in India; overlapping jurisdiction Painfully Slow Pace (1/3) CMA SUNEEL KUMAR MANNEM PRACTICING COST ACCOUNTANT NEEDCONTD. (2/3) RESOLUTION TIME - Takes 4.5 years to Wind Up an Existing Co. 5 4.5
4 3.5 3 2.5 2 1.5 1 0.5 0 In years 4.5 1.5 India United States 1
1 0.8 0.6 United Kingdom Malaysia Singapore Japan RECOVERY RATE 100.00% 90.00% 92.90% 90.10%
10.00% 0.00% JAPAN FINLAND GERMANY USA CHINA INDIA NEEDCONTD. (3/3) EASE OF DOING BUSINESS
Indian Bank Neck Deep in Bad Gross NPA 4 Lakh Crores & Huge amount of Restructured Loans Total Stressed Assets 11% of Total Lending Bad Loans has grown from 3.49% (2013) to 8.3% (2015) Corporate Bad Loans 56% - Bad Loans of Indian Bank. Process Cost of Insolvency in India vis-a-vis- Other Countries Ease of Doing Business Easy Exit-Where India Stands CMA SUNEEL KUMAR MANNEM PRACTICING COST ACCOUNTANT OLD DISEASE - NEW PRESCRIPTION - WHY ?
Time Bound Manner Promote Entrepreneurship Improve Credit Availability Balance Interest of all Stakeholders Minimize the Role of Adjudicating Authority Tackles 100 years old Laws CMA SUNEEL KUMAR MANNEM PRACTICING COST ACCOUNTANT The erstwhile legislative frame work (a) Chapter XIX and Chapter XX of Companies Act, 2013 (b) Part VIA, Part VII and Section 391 of Companies Act, 1956 (c) RDDBFI Act, 1993 (d) SARFAESI Act, 2002 (e) SICA Act, 1985 (f) The Presidency Towns Insolvency Act, 1909
(g) The Provincial Insolvency Act, 1920 (h) Chapter XIII of LLP Act, 2008 ROAD TO CODE CMA SUNEEL KUMAR MANNEM PRACTICING COST ACCOUNTANT APPLICABILITY CMA SUNEEL KUMAR MANNEM PRACTICING COST ACCOUNTANT NEW INSTITUTIONS CMA SUNEEL KUMAR MANNEM PRACTICING COST ACCOUNTANT INSOLVENCY & BANKRUPTCY BOARD OF INDIA(IBBI) Headed by Chair person and consist of ten
members out of which at least three will be whole-time members. powers of civil court issuing summons, discovery and production of books, inspection of books/ registers Insolvency Professional Agencies Develop professional standards, code of ethics and be first level regulator for insolvency professional members. Lead to development of a competitive industry for such professionals. CMA SUNEEL KUMAR MANNEM PRACTICING COST ACCOUNTANT Information Utilities IUs Registered with IBBI IPs are expected to function on basis of financial information available electronically .
Information Utility will collect, collate, authenticate and disseminate financial information to be used in insolvency, liquidation and bankruptcy proceedings. CMA SUNEEL KUMAR MANNEM PRACTICING COST ACCOUNTANT Adjudicating Authority NCLT - Deal with insolvency matters of Co. & LLP - Appeal to NCLAT Debt Recovery Tribunal - Deal with insolvency matters of individual & Partnership firm - Appeal as to DRAT GROUNDS FOR REJECTION Adjudicating Authority within 14 days of receipt of application, by an
order - Admit the application If it is complete Reject the application If it is incomplete Default Default not occurre occurred d NOTICE OF REJECTION Adjudicating Authority shall before rejecting application, give notice to applicant to rectify defects in application within 7 days from the date of receipt of such notice
WHO CAN INVOKE CMA SUNEEL KUMAR MANNEM PRACTICING COST ACCOUNTANT INVOKING PROVISIONS OF CODE DEFAULT In case of Co. & LLP Minimum amount of ` 1 lakh In case of Partnership & Individual Minimum amount of ` 1 thousand Minimum amount of ` 1 lakh & ` 1 thousand can be increased upto ` 1 Cr & ` 1 lakh respectively by CG Where any Company or LLP
commitsA default in paying its Financial debt Operational debt Then a financial creditor/ operational creditor/ Company & LLP itself May file an application, for initiating corporate insolvency resolution process with the Adjudicating Authority. TIME LINE 180 days 90 days (Maximum) 270 days
FAST TRACK : 90 days 45 days (One time) 135 days Adjudicating Authority after admission of application shall, by an order Declare a Moratorium Cause a Public Announcement Appoint Interim Resolution
Professional CMA SUNEEL KUMAR MANNEM PRACTICING COST ACCOUNTANT MORATORIUM EFFECT [sec 14(1)(a) - (d)] (1/2) Adjudicating Authority shall by order prohibit the following: Institution/continuation/proceedings of suits including execution of any judgment, decree or order in any Court Transferring, encumbering, alienating or disposing of assets/legal right/beneficial interest Any action to Foreclosure, Recover or enforce any security interest created including any action under SARFAESI Act, 2002 Recovery of any property by owner or lessor where
such property is occupied CMA SUNEEL KUMAR MANNEM PRACTICING COST ACCOUNTANT MORATORIUM EFFECT [sec 14(1)(a) - (d) ] (2/2) Objective Maximizing value of the Entity to Continue Operation No additional stress on Business - Supply of essential goods or services to the Corporate Debtor as may be specified shall not be terminated or suspended or interrupted - Central Government in consultation with any financial regulator may specify such transactions. Order of Moratorium made by Adjudicating Authority; - Start from Date of MORATORIUM
Admission of Application; PERIOD Cease to effect [sec 14(1)] Date of Approval of Resolution Plan or Liquidation Order . PUBLIC ANNNOUNCEMENT Public announcement contain following information: Name & address of defaulted Corp. Debtor Name of Registrar with which Corp. Debtor is incorporated or registered Last 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 CMA SUNEEL KUMAR MANNEM PRACTICING COST ACCOUNTANT INTERIM RESOLUTION PROFESSIONALS APPOINTMENT: Appointment by Adjudicating Authority within 14 days from Admission of Application TENURE: Shall not exceed 30 days from date of Appointment Once IRP is appointed : Management of affairs of Corp. Debtor shall vest with IRP Powers of BOD/
Partners (LLP) shall stand suspended & will be exercised by IRP Officers & Managers of Corp. Debtor shall report to IRP FI maintaining accounts of Corp. Debtor shall follow instructions of IRP RESOLUTION PROFESSIONAL Appointment by Committee of Creditors may in their first meeting
within 7 (Seven) days of Constitution of Committee Resolve to appoint the Interim Resolution Professional as a Resolution Professional (OR) Replace the Interim Resolution Professional by another Resolution Professional. Resolution Professional shall conduct the entire Insolvency Resolution Process and manage the operations of the company during the corporate Insolvency Resolution Process Period. Resolution Professional shall exercise all such powers and duties as are vested on the Interim Resolution Professional. All Meetings of the Committee of Creditors shall be conducted by the Resolution Professional CMA SUNEEL KUMAR MANNEM PRACTICING COST ACCOUNTANT DUTIES OF RESOLUTION PROFESSIONAL CMA SUNEEL KUMAR MANNEM
PRACTICING COST ACCOUNTANT REPLACEMENT OF RESOLUTION PROFESSIONAL CoC to replace the Resolution Professional any time during the pendency of IRP. CoC may forward name of another Insolvency Professional to the Adjudicating Authority The Adjudicating Authority shall forward name of proposed Resolution Professional to the Board for confirmation On confirmation being received from the Board, appoint him as Resolution Professional CMA SUNEEL KUMAR MANNEM PRACTICING COST ACCOUNTANT COMMITTEE OF CREDITORS
(1/2) The Interim Resolution Professional shall Collate all claims AND Determine of financial position Constitute a Committee of Creditors comprising of all Financial Creditors All decisions of Committee taken by vote of not less than 75% Related Party: If no Financial Creditor, CoC shall exercise with
functions. Shall not have any Right of Representation, Participation or voting Position of Financial Creditor- Consortium Agreement : - Each Financial Creditor shall be COMMITTEE OF CREDITORS (2/2) Position of Financial Creditor when he is an Operational Creditor: shall be considered Financial Creditor to the extent of Financial Debts; Voting Shares to the extent of Financial Debts; Operational Creditor to the extent of Operational Debt; Assignment of Operational Debt If an Operational Creditor has assigned or legally transferred any Operational Debt to a Financial Creditor, the Assignee of Transferee shall be considered as an Operational Creditor to
the extent of such assignment or legal transfer. Determination of Voting Share by Financial Creditor IBC Board may specify the manner of determining of voting share. CMA SUNEEL KUMAR MANNEM PRACTICING COST ACCOUNTANT RESOLUTION PLAN Preparation of Information Memorandum for formulating a Resolution Plan Providing to Resolution Applicant access to all relevant information Resolution 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 Approval Submitting Resolution Plan to Adjudicating Authority Adjudicating Authority may by order approve the Resolution Plan; Moratorium Period ends R P will be binding on the Corp. Debtor, its Employees, Members, Creditors, Guarantors & other Stakeholders
If Resolution Plan not approved or - Not ready within 180 days or - Adjudicating Authority rejects the Resolution Plan It will pass a Liquidation Order. R P will act as a Liquidator and all the powers of the Board of CMA SUNEEL KUMAR MANNEM Directors will vest with the Liquidator PRACTICING COST ACCOUNTANT PRIORITY PRIORITY The following debts will be paid in PRIORITY given below: Insolvency Resolution Cost & Liquidation Cost; Debts to Secured Creditor (who have relinquished their security interest) & Workmens dues (for 24 months before commencement); Wages & Unpaid Dues to employees (other than workmen) (for 12 months before commencement);
Financial Debts to Unsecured Creditors; Workmens Dues for earlier period; Crown Debts and Debts to Secured Creditor following Enforcement of Security Interest; Remaining Debts; Preference Shareholders; Equity Shareholders or partners. KEY BENEFITS CMA SUNEEL KUMAR MANNEM PRACTICING COST ACCOUNTANT CHALLENGE Not a Magic wand Benefits will follow after 3-5 years from now. To create Large pool of Insolvency Professionals. Draft Procedural Rules for Insolvency Professionals Information Utilities Establishment of several new institutional mechanisms.
High value of Performance Bond Order of priority to Distribute Assets Secured Creditors why not up to Collateral Value? Unsecured creditors have priority over Trade Creditors? Government Dues after unsecured creditors ? Formation of Multiple Information Utilities Information about a Company may not be available through a Single IUs Insolvency & Bankruptcy Fund- manner of usage of the Fund ? CMA SUNEEL KUMAR MANNEM PRACTICING COST ACCOUNTANT OPPORTUNITY TO US
Interim Resolution Professional Resolution Professional To prepare Resolution plan To Represent - Financial Creditor; - Operational Creditor; - Corporate Debtor before NCLT- DRT & NCLAT- DRAT To represent the Winding Up cases before the Tribunal To prepare scheme & seek approval from Tribunal for Revival & Rehabilitation of Sick Cos. CMA SUNEEL KUMAR MANNEM PRACTICING COST ACCOUNTANT
How to enroll for IP Online Exam conducting By NiSM Minimum Score- 60% Web Linkhttps://certifications.nism.ac.in/nisma ol/ Recent Amendments Insolvency Resolution professionals who quit a case midway maybe debarred for 5 years. (Source- Business Line)
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