A country like India always welcomes new talents, especially in the business-centric field. It helps in creating a proper sense of economic growth in the country. It is one essential business supporting point to bring proper mechanism to settle bankruptcies without causing damage to the contributor. The Non-performing assets in any economy can always lead to locking physical assets and funds, which can cause bigger concerns for the lender, providing loan and financial assistance to NPA entities.
Recent studies have indicated that more than 3 crores of public money are stuck in NPA. World Bank states that resolving such insolvencies will take over 4 years in India with an average recovery of around 25 cents to the dollar. The SICA and BIFR failed to review the companies and recover assets. So, the government has appointed a committee under the New Bankruptcy Code. It is vital to recognize the reforms in insolvency regimes for improving the business environment. For that, the government has added Insolvency And Bankruptcy Code Bill in 2015, November. It is mainly drafted by BLLRC under Ministry of Finance. The NCLT India talks about this bill in details.
Structure of the code and more:
As per the basic structure of this code, it comprises of 255 sections, 5 parts, 11 schedules and 21 chapters under IBC. The code, here, appeals to the Presidency Towns Insolvency Act and Provincial Insolvency Act. Other than that, this code amends some of the major laws such as The Companies Act, Sick Industrial Companies Repeal Act, Indian Partnership Act, LLP Act and Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act.
- There are mainly five parts of the code. The first part is preliminary, covering section 1 to 3.
- Part II comprises of the liquidation and insolvency resolution for the corporate bodies, covering section 4 to 77 with around 7 chapters.
- Part III is the bankruptcy and Insolvency resolution for partnership firms and individuals under section 78 to 187 with 7 separate chapters.
- Part IV is the regulation of agencies, insolvency professionals and information utilities under section 188 to 223 with 7 chapters. The last part, V, remains miscellaneous.
More about agencies and intermediaries:
There are certain selected intermediaries and agencies, which are involved under bankruptcy and insolvency process. Be sure to learn about those names as well, before coming to the right stage. Those names are Insolvency Professionals, The Insolvency Regulator, Information Utilities, Insolvency Professional Agencies, and Adjudicatory authorities. If you check out the code thoroughly, you will come to learn more about the powers, duties, and responsibilities of every intermediary.
Salient features of the said code:
To learn more about the Insolvency And Bankruptcy Code, you might have to check out more towards the salient features and company law appellate tribunal now. The more you get along with the features, the better you can make use of this code later on, when needed.
Under the adjudicating authority, it has been stated that NCLT must deal with matters associated with corporate insolvency, enforcement of the personal guarantees and LLP associated with corporate debtors.
- It will further talk about the DRT, which will work on partnership and individual insolvency.
- Adjudicating sections must have jurisdiction to work on insolvency based issues. No injunction will be granted by tribunal, court or authority along with aspect taken, or persuasion of any power under DRT or NCLT.
The operational and financial creditors:
The code will always come to make one distinction between the creditors who are holding financial debts and operational debts. Financial and operational debt will be under term loans and non-fund based limits like bank guarantees. Then you have debentures, bonds, loan stocks and more falling under the financial creditors.
- Under the financial section, you will come across lease or just hiring of purchasing agreements. It will talk about receivable sold or discounted ones.
- Operational debt actually means debt incurred in place for provisions of services or goods including employment or just debt in respect of dues arising under law.
Simplification of the IRP code:
In place of continuing the current resolution regime, the code seeks to shift responsibility on the shoulders of creditors to initiate IPR against the corporate debtor. It helps in empowering all class of creditors to work on resolution procedure to cover non-payment of the valid claims. The code will not just help in providing immediate suspension of directors and promotes power, but it can also enable the standstill period. It will help the stakeholders to facilitate discussion to come to a common resolution other than running independent procedure.
Always be sure to check out the insolvency resolution procedure under the code, to learn more about its usability and work on the steps accordingly. If you find it difficult, then working with the pros will help you.
Amy Jones has been serving as an experienced legal content writer in Ahlawat & Associates, who is related to Insolvency and Bankruptcy Law in India. She is a passionate writer and always on the lookout for opportunities for sharing her knowledge with the legal community. Follow her company on various social media networks like Twitter, Facebook, and LinkedIn.