Insolvency Resolutions Process and its Role of Different Stakeholders

by Libord Group One-stop Financial Services

Insolvency is a state of financial distress where a company or individual is unable to pay off their debts. In such cases, insolvency resolution processes (IRPs) are initiated to help them resolve their financial issues. This article will provide an overview of the insolvency resolution process in India, the different stages involved, and the role of various stakeholders.

Insolvency Resolution Process in India:

The insolvency resolution process in India is governed by the Insolvency and Bankruptcy Code (IBC) 2016. The IBC provides for a time-bound and structured process for the resolution of insolvency. The process involves the following stages:

1.       Initiation: The insolvency resolution process can be initiated by the debtor or creditor. If a debtor fails to pay its dues, a creditor can file a petition with the National Company Law Tribunal (NCLT) to initiate the process.

2.       Appointment of Interim Resolution Professional (IRP): Once the NCLT admits the petition, an IRP is appointed. The IRP takes over the management of the company and works with the debtor and creditors to resolve the insolvency issue.

3.       Preparation of Information Memorandum (IM): The IRP prepares an IM, which contains all the relevant information about the debtor's assets, liabilities, and financial position. The IM is shared with potential resolution applicants who can submit their resolution plans.

4.       Submission of Resolution Plans: The resolution plans are submitted by interested parties within the given timeline. The resolution plans should provide for the revival of the debtor company or liquidation of its assets.

5.       Approval of Resolution Plan: The resolution plan is approved by the Committee of Creditors (CoC) if it meets the requirements specified in the IBC. If the CoC approves the plan, it is submitted to the NCLT for final approval.

6.       Implementation of Resolution Plan: Once the NCLT approves the resolution plan, the successful resolution applicant takes over the management of the debtor company and implements the resolution plan.

Role of Different Stakeholders:

1.       Debtor: The debtor initiates the insolvency resolution process if it is unable to pay off its debts. The debtor cooperates with the IRP and the CoC to resolve the insolvency issue.

2.       Creditor: A creditor can file a petition with the NCLT to initiate the insolvency resolution process if the debtor fails to pay its dues. The creditor participates in the CoC and approves the resolution plan.

3.       Interim Resolution Professional (IRP): The IRP takes over the management of the debtor company and works with the debtor and creditors to resolve the insolvency issue. The IRP prepares the IM and manages the submission and approval of resolution plans.

4.       Committee of Creditors (CoC): The CoC is formed once the insolvency resolution process is initiated. It is responsible for approving the resolution plan submitted by the resolution applicants.

5.       Resolution Applicant: The resolution applicant submits the resolution plan and implements it if it is approved. The resolution applicant can be an individual, a company, or a group of companies.

Conclusion:

The insolvency resolution process in India is a structured and time-bound process that aims to resolve the financial distress of a company or individual. The process involves the initiation of insolvency, appointment of an IRP, submission and approval of resolution plans, and implementation of the approved plan. The success of the process depends on the cooperation of all stakeholders involved in the process.

Sponsor Ads

• Ad Space Available - Rent it Now!

Created on Feb 20th 2023 02:00. Viewed 79 times.

Comments