Insolvency & Bankruptcy Code, 2016 and Imp Role of PCS

Introduction:‑

– This Act Come into force on 28th May, 2016 as per Central Government notification in the Official Gazette May, 2016.

– IBC Code applicable to whole India except jammu & Kashmir.

– The Insolvency and Bankruptcy Code, 2016 (IBC) is the bankruptcy law of India which seeks to consolidate the existing framework by creating a single law for insolvency and bankruptcy.

– IBC Code Replaces with Sick Industrial Companies (Special Provisions) Repeal Act, 2003 and modifies / amends some provisions of other legislations like Companies Act, 2013 SARFAESI etc.

– This code apply to The Company, Limited Liability Partnership(LLP), An individual, Hindu Undivided Family, Partnership firm , Trust, Any other entity established under a statute.

– The structure of the code is divided into 5 PARTS Where PART-1:-Short title, extent, definitions, PART-2:- 7 Chapters Insolvency Resolution And Liquidation for Corporate Persons, PART-3:- 7 Chapters Insolvency Resolution and Bankruptcy for Individuals and Partnership Firms, PART-4:-7 Chapters Regulation of Insolvency Professionals, Agencies and information utilities, PART-5:-11 Schedules Miscellaneous (enables amendments in other statues such as Companies Act 2013).

(1) INSOLVENCY:‑

INSOLVENCY is the inability of a person or corporation to pay their bills as and when they become due and payable.

(2) BANKRUPTCY:‑

Bankruptcy is when a person or company is legally declared incapable of paying their due and payable bills.

(3) LIQUIDATION:‑

Liquidation is the process of winding up a corporation or incorporated entity.

– There are various Regulators plays important role In IBC which is Insolvency and Bankruptcy Board of India (HMI), Insolvency Professional Agencies, Insolvency Professionals, Information Utilities.

– The Adjudicating Authority is National Company Law Tribunal(NCLT), National Company Law Appellate Tribunal (NCLAT), Debt Recovery Tribunal (DRT) , Debt Recovery Appellate Tribunal (DRAT).

NEED OF IBC CODE:-

– Ease of Doing Business

– Promotion of entrepreneurship

– Balance of interest of all stakeholders

– Maximizing the Asset Value Of Insolvent Firms.

– Alteration in the order of priority of payment of government dues

– Creditor Driven Insolvency Resolution

– Better depth information flow between creditors and debtors

– Provide confidence to lenders of their rights and their enforcement.

WHO CAN APPEAL?

(1) Financial Creditor:-

Any person to whom a financial debt is owed & Includes a person to whom such debt legally assigned or transferred.

(2) Operational Creditor:-

A person to whom an operational debt is owed & Includes any person to whom such debt legally assigned or transferred.

(3) Corporate Debtor:-

A corporate person who owes a debt to any person.

– If the default is above Rs. 1,00,000 (may be increase up to Rs. 1 core by the government, by notification), the creditor may initiate insolvency resolution process The codes proposed two independent stages i.e (1) Insolvency Resolution Process (2) Liquidation

– The code aims to Resolve Insolvencies In a Strict Time-bound Manner – the evaluation and viability determination must be completed within 180 days.

– Moratorium period of 180 days (extendable upto 270 days) for the Company. Insolvency professional to take over the management of the Company.

– By virtue of IBC the Voluntary Winding Up Procedure has been shifted from Companies Act to IBC.

ROLE OF PRACTICING COMPANY SECRETARY:-

The Company Secretary has a vital role to play in the aspects related to governance of Corporate as they are involved and contribute to the Corporate right from the

Incorporation till the Winding Up of the Company. However, professional competence, responsibility towards stakeholders and demonstration of the highest ethical standards are required to make the exercise a success and meet the objectives of the legislation.

– Interim Resolution Professional

– Resolution Professional

– To prepare Resolution plan

– To Represent on behalf of Financial Creditor; Operational Creditor; Corporate Debtor

– To represent the Winding Up cases before the Tribunal

– To prepare scheme & seek approval from Tribunal for Revival & Rehabilitation of Sick Cos.

(Author is a Practicing Company Secretary and can be reached at yashreedixit19@gmail.com)