Insolvency and Bankruptcy code 2016 was introduced with the vision to ease the restructuring and insolvency resolutions of corporate person partnership firms & other specified persons.
The provisions for Fast Track Insolvency Procedure are laid under Part-II, Chapter-4 of the code. The ambit of the said provision covers Small companies, Start-Ups, Unlisted Companies with a total asset value of below Rupees 1 crore. The application to initiate the process can only be made by the specified Category of Persons. The detailed provisions for the initiated procedure are given under section 55 to 58.
THE NEED OF FAST TRACK CORPORATE RESOLUTION PROCEDURE-
The rapid growth of Corporate Culture compelled lawmakers to bring into some major changes according to the need. Earlier there were multiple laws that were later substituted by the INSOLVENCY AND BANKRUPTCY CODE, 2016.
Corporate Insolvency Resolution Process is a 270-day process. During the given time frame, a committee of creditors, constituting the financial creditors of the corporate debtor, assesses its viability and invites resolution plans for the corporate debtors. If the Committee of creditors believes, as the case may be, that the business is viable, then approves the appropriate resolution plan for the corporate Debtor to undergo the process. If no resolution plan is approved, then the corporate debtor goes into liquidation.
However, like most standard insolvency resolution processes for corporate debtors, this process is better suited to larger companies, with more complex capital structures.
However, it was disquieting to see that even after taking the major initiative; India was still ranked low in ease of doing business which was very demotivating for the concept of “Startup India”. This was an alarming statistic for the Indian economy.
The need was felt to introduce a different insolvency resolution process for small corporate debtors, which could be satisfied by the fast-track process. However, the fast track process barely differs from the Corporate Insolvency Resolution Process. It primarily reduces the time period within which the insolvency of the debtor may be resolved within ninety days, extendable by another 45 days if the adjudicating authority believes so.
As the name highlights, the time period for the conclusion of the fast track corporate resolution process is 90 days which has to be counted from the date of commencement of the insolvency process. The time period could be extended by the concerned adjudicating authority only for once for a maximum period of 45 days.
APPLICATION CAN BE MADE AGAINST-
The provision under section 55 states, that the application of FTCIRP could be made against the below mentioned corporate debtors-
1. Small Companies– as defined under the Companies Act, 2013
2. Start-ups– as defined in the Government of India notification on date 23rd May 2017 as issued by the ministry of commerce & industry
3. Unlisted Company– whose total assets as reported in the financial statement of immediately preceding financial year, not exceeding rupees 1 crore.
FAST TRACK CORPORATE INSOLVENCY RESOLUTION PROCESS COULD BE INITIATED BY-
The application for FAST TRACK CORPORATE INSOLVENCY RESOLUTION PROCESS could be filed by the Creditors or corporate debtors, as the case may be. The application should be attached by the following documents-
1. Proof of the existence of default evident from the records available with the information utility
2. Such other information as may be notified by the IBBI.
STEPS OF FAST TRACK CORPORATE INSOLVENCY RESOLUTION PROCESS-
1. APPOINTMENT OF RESOLUTION PROFESSIONAL: An Insolvency Professional can be appointed as a resolution professional, only if he’s not the related party of the concerned corporate debtor.
2. PUBLIC ANNOUNCEMENT: the appointed insolvency professional as “Interim Resolution professional” is bound to make a public announcement of his appointment but not later than 3 days from such an appointment.
3. SUBMISSION & VERIFICATION OF CLAIMS: the operational creditors & financial creditors have to submit their claims with proofs in a prescribed manner within the time period of 10 days to the Interim resolution professional, along with the supplementary documents and clarifications.
After receiving the claims, the interim resolution professional has to verify the same within 7 days from the end date of receipt of claims and has to publish the list of the creditors.
4. FORMATION OF COMMITTEE OF CREDITORS: The interim resolution professional has to form a “committee of creditors”.
5. MEETING OF COMMITTEE OF CREDITORS: the interim resolution professional has to conduct the first meeting of the CoC, where either the interim resolution professional is appointed as Resolution professional or the CoC suggest for the Resolution professional. The meeting has to be conducted within 7 days after filing the report. The notice of the meeting should be served 1 week before the date of the meeting.
6. APPOINTMENT OF REGISTERED VALUER: The Resolution Professional has to appoint a registered valuer within 7 days, from his appointment in order to initiate the liquidation of the concerned corporate debtor.
7. DRAFTING OF INFORMATION MEMORANDUM: the resolution professional has to draft the memorandum of information in electronic form and should have conveyed to all the members of the Committee of Creditors.
8. FORMATION OF RESOLUTION PLAN: is drafted by resolution applicant, has to be in accordance with the need of the Committee of creditors, and should consist of all the measures needed to implement.
9. APPROVAL OF THE RESOLUTION PLAN: the plan submitted by resolution applicants is shortlisted by the resolution professional and the appropriate resolution plan is sent to the committee of creditors seeking their approval.
10. SUBMISSION OF APPROVAL PLAN TO ADJUDICATING AUTHORITY: After the approval of the resolution plan it is sent to the adjudicating authority with required clarifications. On receiving the resolution plan the adjudicating authority may pass an order by approving or rejecting the plan.
Fast Track process is a well-designed procedure in order to promote easement of doing business by evicting the complex procedure for small companies. The aim is to support and develop the corporate culture to boom the economy of India.
eStartIndia is the professional tech-based online business and legal services providing a platform that helps the clients to simplify the procedures of all kinds of registration, implementation, tax concerns, and any other compliance and services related to the business in India.