{"id":12272,"date":"2021-07-29T00:00:00","date_gmt":"2021-07-29T00:00:00","guid":{"rendered":"https:\/\/www.nextias.com\/current_affairs\/uncategorized\/29-07-2021\/insolvency-and-bankruptcy-code-amendment-bill-2021-passed\/"},"modified":"2024-07-05T13:18:11","modified_gmt":"2024-07-05T07:48:11","slug":"insolvency-and-bankruptcy-code-amendment-bill-2021-passed","status":"publish","type":"post","link":"https:\/\/www.nextias.com\/ca\/current-affairs\/29-07-2021\/insolvency-and-bankruptcy-code-amendment-bill-2021-passed","title":{"rendered":"Insolvency and Bankruptcy Code (Amendment) Bill, 2021 Passed"},"content":{"rendered":"<p><span style=\"font-size: 11pt;\"><span style=\"font-family: 'Book Antiqua',serif;\"><span style=\"color: #000000;\"><strong><u>In News<\/u><\/strong><\/span><\/span><\/span><\/p>\n<p><span style=\"font-size: 11pt;\"><span style=\"font-family: 'Book Antiqua',serif;\"><span style=\"color: #000000;\">Recently, the <\/span><\/span><\/span><span style=\"font-size: 11pt;\"><span style=\"font-family: 'Book Antiqua',serif;\"><span style=\"color: #000000;\"><strong>Insolvency and Bankruptcy Code (IBC) (Amendment) Bill, 2021<\/strong><\/span><\/span><\/span><span style=\"font-size: 11pt;\"><span style=\"font-family: 'Book Antiqua',serif;\"><span style=\"color: #000000;\"> has been passed by the Lok Sabha.<\/span><\/span><\/span><\/p>\n<p><span style=\"font-size: 11pt;\"><span style=\"font-family: 'Book Antiqua',serif;\"><span style=\"color: #000000;\"><strong><u>Insolvency and Bankruptcy Code (Amendment) Bill, 2021<\/u><\/strong><\/span><\/span><\/span><\/p>\n<ul>\n<li style=\"list-style-type: disc;\"><span style=\"font-size: 11pt;\"><span style=\"font-family: 'Book Antiqua',serif;\"><span style=\"color: #000000;\">It proposed the <\/span><\/span><\/span><span style=\"font-size: 11pt;\"><span style=\"font-family: 'Book Antiqua',serif;\"><span style=\"color: #000000;\"><strong>Pre-packaged Insolvency Resolution Process<\/strong><\/span><\/span><\/span><span style=\"font-size: 11pt;\"><span style=\"font-family: 'Book Antiqua',serif;\"><span style=\"color: #000000;\"> (PIRP), also called \u2018<\/span><\/span><\/span><span style=\"font-size: 11pt;\"><span style=\"font-family: 'Book Antiqua',serif;\"><span style=\"color: #000000;\"><strong>pre-packs<\/strong><\/span><\/span><\/span><span style=\"font-size: 11pt;\"><span style=\"font-family: 'Book Antiqua',serif;\"><span style=\"color: #000000;\">\u2019 as an insolvency resolution mechanism for <\/span><\/span><\/span><span style=\"font-size: 11pt;\"><span style=\"font-family: 'Book Antiqua',serif;\"><span style=\"color: #1155cc;\"><strong><u>Micro, Small and Medium Enterprises<\/u><\/strong><\/span><\/span><\/span><span style=\"font-size: 11pt;\"><span style=\"font-family: 'Book Antiqua',serif;\"><span style=\"color: #000000;\"> (MSMEs).<\/span><\/span><\/span><\/li>\n<li style=\"list-style-type: disc;\"><span style=\"font-size: 11pt;\"><span style=\"font-family: 'Book Antiqua',serif;\"><span style=\"color: #000000;\">It will replace the <\/span><\/span><\/span><span style=\"font-size: 11pt;\"><span style=\"font-family: 'Book Antiqua',serif;\"><span style=\"color: #000000;\"><strong>Insolvency and Bankruptcy Code (Amendment) Ordinance, 2021<\/strong><\/span><\/span><\/span><span style=\"font-size: 11pt;\"><span style=\"font-family: 'Book Antiqua',serif;\"><span style=\"color: #000000;\">, which was promulgated on 4<\/span><\/span><\/span><span style=\"font-size: 11pt;\"><span style=\"font-family: 'Book Antiqua',serif;\"><span style=\"color: #000000;\"><sup>th<\/sup><\/span><\/span><\/span><span style=\"font-size: 11pt;\"><span style=\"font-family: 'Book Antiqua',serif;\"><span style=\"color: #000000;\"> April 2021.<\/span><\/span><\/span><\/li>\n<\/ul>\n<p><span style=\"font-size: 11pt;\"><span style=\"font-family: 'Book Antiqua',serif;\"><span style=\"color: #000000;\"><strong><u>Pre-pack<\/u><\/strong><\/span><\/span><\/span><\/p>\n<ul>\n<li style=\"list-style-type: disc;\"><span style=\"font-size: 11pt;\"><span style=\"font-family: 'Book Antiqua',serif;\"><span style=\"color: #000000;\">It envisages the <\/span><\/span><\/span><span style=\"font-size: 11pt;\"><span style=\"font-family: 'Book Antiqua',serif;\"><span style=\"color: #000000;\"><strong>resolution of the debt<\/strong><\/span><\/span><\/span><span style=\"font-size: 11pt;\"><span style=\"font-family: 'Book Antiqua',serif;\"><span style=\"color: #000000;\"> of a distressed company through a <\/span><\/span><\/span><span style=\"font-size: 11pt;\"><span style=\"font-family: 'Book Antiqua',serif;\"><span style=\"color: #000000;\"><strong>direct agreement <\/strong><\/span><\/span><\/span><span style=\"font-size: 11pt;\"><span style=\"font-family: 'Book Antiqua',serif;\"><span style=\"color: #000000;\">between <\/span><\/span><\/span><span style=\"font-size: 11pt;\"><span style=\"font-family: 'Book Antiqua',serif;\"><span style=\"color: #000000;\"><strong>secured creditors <\/strong><\/span><\/span><\/span><span style=\"font-size: 11pt;\"><span style=\"font-family: 'Book Antiqua',serif;\"><span style=\"color: #000000;\">and the <\/span><\/span><\/span><span style=\"font-size: 11pt;\"><span style=\"font-family: 'Book Antiqua',serif;\"><span style=\"color: #000000;\"><strong>existing owners or outside investors<\/strong><\/span><\/span><\/span><span style=\"font-size: 11pt;\"><span style=\"font-family: 'Book Antiqua',serif;\"><span style=\"color: #000000;\">, <\/span><\/span><\/span><span style=\"font-size: 11pt;\"><span style=\"font-family: 'Book Antiqua',serif;\"><span style=\"color: #000000;\"><strong>instead of a public bidding process<\/strong><\/span><\/span><\/span><span style=\"font-size: 11pt;\"><span style=\"font-family: 'Book Antiqua',serif;\"><span style=\"color: #000000;\">.<\/span><\/span><\/span><\/li>\n<li style=\"list-style-type: disc;\"><span style=\"font-size: 11pt;\"><span style=\"font-family: 'Book Antiqua',serif;\"><span style=\"color: #000000;\">Under the pre-pack system, <\/span><\/span><\/span><span style=\"font-size: 11pt;\"><span style=\"font-family: 'Book Antiqua',serif;\"><span style=\"color: #000000;\"><strong>financial creditors<\/strong><\/span><\/span><\/span><span style=\"font-size: 11pt;\"><span style=\"font-family: 'Book Antiqua',serif;\"><span style=\"color: #000000;\"> will agree to terms with the <\/span><\/span><\/span><span style=\"font-size: 11pt;\"><span style=\"font-family: 'Book Antiqua',serif;\"><span style=\"color: #000000;\"><strong>promoters or a potential investor<\/strong><\/span><\/span><\/span><span style=\"font-size: 11pt;\"><span style=\"font-family: 'Book Antiqua',serif;\"><span style=\"color: #000000;\"> and seek <\/span><\/span><\/span><span style=\"font-size: 11pt;\"><span style=\"font-family: 'Book Antiqua',serif;\"><span style=\"color: #000000;\"><strong>approval of the resolution plan<\/strong><\/span><\/span><\/span><span style=\"font-size: 11pt;\"><span style=\"font-family: 'Book Antiqua',serif;\"><span style=\"color: #000000;\"> from the <\/span><\/span><\/span><span style=\"font-size: 11pt;\"><span style=\"font-family: 'Book Antiqua',serif;\"><span style=\"color: #000000;\"><strong>National Company Law Tribunal<\/strong><\/span><\/span><\/span><span style=\"font-size: 11pt;\"><span style=\"font-family: 'Book Antiqua',serif;\"><span style=\"color: #000000;\"> (NCLT).<\/span><\/span><\/span>\n<ul>\n<li style=\"list-style-type: circle;\"><span style=\"font-size: 11pt;\"><span style=\"font-family: 'Book Antiqua',serif;\"><span style=\"color: #000000;\">The approval of <\/span><\/span><\/span><span style=\"font-size: 11pt;\"><span style=\"font-family: 'Book Antiqua',serif;\"><span style=\"color: #000000;\"><strong>at least 66 per cent of financial creditors<\/strong><\/span><\/span><\/span><span style=\"font-size: 11pt;\"><span style=\"font-family: 'Book Antiqua',serif;\"><span style=\"color: #000000;\"> that are unrelated to the corporate debtor would be <\/span><\/span><\/span><span style=\"font-size: 11pt;\"><span style=\"font-family: 'Book Antiqua',serif;\"><span style=\"color: #000000;\"><strong>required before a resolution plan is submitted <\/strong><\/span><\/span><\/span><span style=\"font-size: 11pt;\"><span style=\"font-family: 'Book Antiqua',serif;\"><span style=\"color: #000000;\">to the NCLT.<\/span><\/span><\/span><\/li>\n<li style=\"list-style-type: circle;\"><span style=\"font-size: 11pt;\"><span style=\"font-family: 'Book Antiqua',serif;\"><span style=\"color: #000000;\">The <\/span><\/span><\/span><span style=\"font-size: 11pt;\"><span style=\"font-family: 'Book Antiqua',serif;\"><span style=\"color: #000000;\"><strong>NCLTs<\/strong><\/span><\/span><\/span><span style=\"font-size: 11pt;\"><span style=\"font-family: 'Book Antiqua',serif;\"><span style=\"color: #000000;\"> will be required to<\/span><\/span><\/span><span style=\"font-size: 11pt;\"><span style=\"font-family: 'Book Antiqua',serif;\"><span style=\"color: #000000;\"><strong> either accept or reject<\/strong><\/span><\/span><\/span><span style=\"font-size: 11pt;\"><span style=\"font-family: 'Book Antiqua',serif;\"><span style=\"color: #000000;\"> an application for a <\/span><\/span><\/span><span style=\"font-size: 11pt;\"><span style=\"font-family: 'Book Antiqua',serif;\"><span style=\"color: #000000;\"><strong>pre-pack insolvency proceeding<\/strong><\/span><\/span><\/span><span style=\"font-size: 11pt;\"><span style=\"font-family: 'Book Antiqua',serif;\"><span style=\"color: #000000;\"> before considering a petition for a <\/span><\/span><\/span><span style=\"font-size: 11pt;\"><span style=\"font-family: 'Book Antiqua',serif;\"><span style=\"color: #000000;\"><strong>Corporate Insolvency Resolution Process<\/strong><\/span><\/span><\/span><span style=\"font-size: 11pt;\"><span style=\"font-family: 'Book Antiqua',serif;\"><span style=\"color: #000000;\"> (CIRP).<\/span><\/span><\/span><\/li>\n<\/ul>\n<\/li>\n<li style=\"list-style-type: disc;\"><span style=\"font-size: 11pt;\"><span style=\"font-family: 'Book Antiqua',serif;\"><span style=\"color: #000000;\">This system has become an <\/span><\/span><\/span><span style=\"font-size: 11pt;\"><span style=\"font-family: 'Book Antiqua',serif;\"><span style=\"color: #000000;\"><strong>increasingly popular<\/strong><\/span><\/span><\/span><span style=\"font-size: 11pt;\"><span style=\"font-family: 'Book Antiqua',serif;\"><span style=\"color: #000000;\"> mechanism for <\/span><\/span><\/span><span style=\"font-size: 11pt;\"><span style=\"font-family: 'Book Antiqua',serif;\"><span style=\"color: #000000;\"><strong>insolvency resolution <\/strong><\/span><\/span><\/span><span style=\"font-size: 11pt;\"><span style=\"font-family: 'Book Antiqua',serif;\"><span style=\"color: #000000;\">in the <\/span><\/span><\/span><span style=\"font-size: 11pt;\"><span style=\"font-family: 'Book Antiqua',serif;\"><span style=\"color: #000000;\"><strong>United Kingdom<\/strong><\/span><\/span><\/span><span style=\"font-size: 11pt;\"><span style=\"font-family: 'Book Antiqua',serif;\"><span style=\"color: #000000;\"> (UK) and <\/span><\/span><\/span><span style=\"font-size: 11pt;\"><span style=\"font-family: 'Book Antiqua',serif;\"><span style=\"color: #000000;\"><strong>Europe<\/strong><\/span><\/span><\/span><span style=\"font-size: 11pt;\"><span style=\"font-family: 'Book Antiqua',serif;\"><span style=\"color: #000000;\"> over the past decade.<\/span><\/span><\/span><\/li>\n<\/ul>\n<p><span style=\"font-size: 11pt;\"><span style=\"font-family: 'Book Antiqua',serif;\"><span style=\"color: #000000;\"><strong><u>Advantages of Pre-packs<\/u><\/strong><\/span><\/span><\/span><\/p>\n<ul>\n<li style=\"list-style-type: disc;\"><span style=\"font-size: 11pt;\"><span style=\"font-family: 'Book Antiqua',serif;\"><span style=\"color: #000000;\">Pre-packs are largely aimed at <\/span><\/span><\/span><span style=\"font-size: 11pt;\"><span style=\"font-family: 'Book Antiqua',serif;\"><span style=\"color: #000000;\"><strong>providing MSMEs <\/strong><\/span><\/span><\/span><span style=\"font-size: 11pt;\"><span style=\"font-family: 'Book Antiqua',serif;\"><span style=\"color: #000000;\">with an <\/span><\/span><\/span><span style=\"font-size: 11pt;\"><span style=\"font-family: 'Book Antiqua',serif;\"><span style=\"color: #000000;\"><strong>opportunity to restructure<\/strong><\/span><\/span><\/span> <span style=\"font-size: 11pt;\"><span style=\"font-family: 'Book Antiqua',serif;\"><span style=\"color: #000000;\"><strong>their liabilities and start <\/strong><\/span><\/span><\/span><span style=\"font-size: 11pt;\"><span style=\"font-family: 'Book Antiqua',serif;\"><span style=\"color: #000000;\">with a clean slate.<\/span><\/span><\/span><\/li>\n<li style=\"list-style-type: disc;\"><span style=\"font-size: 11pt;\"><span style=\"font-family: 'Book Antiqua',serif;\"><span style=\"color: #000000;\"><strong>Benefits of Pre-Packs over CIRP<\/strong><\/span><\/span><\/span>\n<ul>\n<li style=\"list-style-type: circle;\"><span style=\"font-size: 11pt;\"><span style=\"font-family: 'Book Antiqua',serif;\"><span style=\"color: #000000;\">CIRP is a <\/span><\/span><\/span><span style=\"font-size: 11pt;\"><span style=\"font-family: 'Book Antiqua',serif;\"><span style=\"color: #000000;\"><strong>time taking process<\/strong><\/span><\/span><\/span><span style=\"font-size: 11pt;\"><span style=\"font-family: 'Book Antiqua',serif;\"><span style=\"color: #000000;\"> due to <\/span><\/span><\/span><span style=\"font-size: 11pt;\"><span style=\"font-family: 'Book Antiqua',serif;\"><span style=\"color: #000000;\"><strong>prolonged litigation <\/strong><\/span><\/span><\/span><span style=\"font-size: 11pt;\"><span style=\"font-family: 'Book Antiqua',serif;\"><span style=\"color: #000000;\">by erstwhile promoters and potential bidders.<\/span><\/span><\/span>\n<ul>\n<li style=\"list-style-type: square;\"><span style=\"font-size: 11pt;\"><span style=\"font-family: 'Book Antiqua',serif;\"><span style=\"color: #000000;\">At the end of December 2020, <\/span><\/span><\/span><span style=\"font-size: 11pt;\"><span style=\"font-family: 'Book Antiqua',serif;\"><span style=\"color: #000000;\"><strong>over 86 per cent of the 1717<\/strong><\/span><\/span><\/span><span style=\"font-size: 11pt;\"><span style=\"font-family: 'Book Antiqua',serif;\"><span style=\"color: #000000;\"> ongoing insolvency resolution proceedings had crossed the <\/span><\/span><\/span><span style=\"font-size: 11pt;\"><span style=\"font-family: 'Book Antiqua',serif;\"><span style=\"color: #000000;\"><strong>270-day threshold.<\/strong><\/span><\/span><\/span><\/li>\n<\/ul>\n<\/li>\n<li style=\"list-style-type: circle;\"><span style=\"font-size: 11pt;\"><span style=\"font-family: 'Book Antiqua',serif;\"><span style=\"color: #000000;\">The pre-pack in contrast is <\/span><\/span><\/span><span style=\"font-size: 11pt;\"><span style=\"font-family: 'Book Antiqua',serif;\"><span style=\"color: #000000;\"><strong>limited<\/strong><\/span><\/span><\/span><span style=\"font-size: 11pt;\"><span style=\"font-family: 'Book Antiqua',serif;\"><span style=\"color: #000000;\"> to a <\/span><\/span><\/span><span style=\"font-size: 11pt;\"><span style=\"font-family: 'Book Antiqua',serif;\"><span style=\"color: #000000;\"><strong>maximum of 120 days with only 90 days<\/strong><\/span><\/span><\/span><span style=\"font-size: 11pt;\"><span style=\"font-family: 'Book Antiqua',serif;\"><span style=\"color: #000000;\"> available to the stakeholders to bring the resolution plan to the NCLT.<\/span><\/span><\/span><\/li>\n<li style=\"list-style-type: circle;\"><span style=\"font-size: 11pt;\"><span style=\"font-family: 'Book Antiqua',serif;\"><span style=\"color: #000000;\">In case of <\/span><\/span><\/span><span style=\"font-size: 11pt;\"><span style=\"font-family: 'Book Antiqua',serif;\"><span style=\"color: #000000;\"><strong>CIRP<\/strong><\/span><\/span><\/span><span style=\"font-size: 11pt;\"><span style=\"font-family: 'Book Antiqua',serif;\"><span style=\"color: #000000;\">, a <\/span><\/span><\/span><span style=\"font-size: 11pt;\"><span style=\"font-family: 'Book Antiqua',serif;\"><span style=\"color: #000000;\"><strong>resolution professional takes control<\/strong><\/span><\/span><\/span><span style=\"font-size: 11pt;\"><span style=\"font-family: 'Book Antiqua',serif;\"><span style=\"color: #000000;\"> of the debtor as a representative of financial creditors while in case of <\/span><\/span><\/span><span style=\"font-size: 11pt;\"><span style=\"font-family: 'Book Antiqua',serif;\"><span style=\"color: #000000;\"><strong>pre-packs<\/strong><\/span><\/span><\/span><span style=\"font-size: 11pt;\"><span style=\"font-family: 'Book Antiqua',serif;\"><span style=\"color: #000000;\">, the <\/span><\/span><\/span><span style=\"font-size: 11pt;\"><span style=\"font-family: 'Book Antiqua',serif;\"><span style=\"color: #000000;\"><strong>existing management<\/strong><\/span><\/span><\/span> <span style=\"font-size: 11pt;\"><span style=\"font-family: 'Book Antiqua',serif;\"><span style=\"color: #000000;\"><strong>retains control<\/strong><\/span><\/span><\/span><span style=\"font-size: 11pt;\"><span style=\"font-family: 'Book Antiqua',serif;\"><span style=\"color: #000000;\">, allowing for <\/span><\/span><\/span><span style=\"font-size: 11pt;\"><span style=\"font-family: 'Book Antiqua',serif;\"><span style=\"color: #000000;\"><strong>minimal disruption of operations<\/strong><\/span><\/span><\/span><span style=\"font-size: 11pt;\"><span style=\"font-family: 'Book Antiqua',serif;\"><span style=\"color: #000000;\">.<\/span><\/span><\/span><\/li>\n<\/ul>\n<\/li>\n<li style=\"list-style-type: disc;\"><span style=\"font-size: 11pt;\"><span style=\"font-family: 'Book Antiqua',serif;\"><span style=\"color: #000000;\"><strong>Protection to Creditors<\/strong><\/span><\/span><\/span>\n<ul>\n<li style=\"list-style-type: circle;\"><span style=\"font-size: 11pt;\"><span style=\"font-family: 'Book Antiqua',serif;\"><span style=\"color: #000000;\">It will provide <\/span><\/span><\/span><span style=\"font-size: 11pt;\"><span style=\"font-family: 'Book Antiqua',serif;\"><span style=\"color: #000000;\"><strong>adequate protections<\/strong><\/span><\/span><\/span><span style=\"font-size: 11pt;\"><span style=\"font-family: 'Book Antiqua',serif;\"><span style=\"color: #000000;\"> so that the system is not <\/span><\/span><\/span><span style=\"font-size: 11pt;\"><span style=\"font-family: 'Book Antiqua',serif;\"><span style=\"color: #000000;\"><strong>misused by firms<\/strong><\/span><\/span><\/span><span style=\"font-size: 11pt;\"><span style=\"font-family: 'Book Antiqua',serif;\"><span style=\"color: #000000;\"> to <\/span><\/span><\/span><span style=\"font-size: 11pt;\"><span style=\"font-family: 'Book Antiqua',serif;\"><span style=\"color: #000000;\"><strong>avoid making payments <\/strong><\/span><\/span><\/span><span style=\"font-size: 11pt;\"><span style=\"font-family: 'Book Antiqua',serif;\"><span style=\"color: #000000;\">to creditors.<\/span><\/span><\/span>\n<ul>\n<li style=\"list-style-type: square;\"><span style=\"font-size: 11pt;\"><span style=\"font-family: 'Book Antiqua',serif;\"><span style=\"color: #000000;\">Currently, <\/span><\/span><\/span><span style=\"font-size: 11pt;\"><span style=\"font-family: 'Book Antiqua',serif;\"><span style=\"color: #000000;\"><strong>only corporate debtors<\/strong><\/span><\/span><\/span><span style=\"font-size: 11pt;\"><span style=\"font-family: 'Book Antiqua',serif;\"><span style=\"color: #000000;\"> themselves are <\/span><\/span><\/span><span style=\"font-size: 11pt;\"><span style=\"font-family: 'Book Antiqua',serif;\"><span style=\"color: #000000;\"><strong>permitted to initiate a PIRP <\/strong><\/span><\/span><\/span><span style=\"font-size: 11pt;\"><span style=\"font-family: 'Book Antiqua',serif;\"><span style=\"color: #000000;\">after obtaining the approval of 66 per cent of their creditors.<\/span><\/span><\/span><\/li>\n<\/ul>\n<\/li>\n<li style=\"list-style-type: circle;\"><span style=\"font-size: 11pt;\"><span style=\"font-family: 'Book Antiqua',serif;\"><span style=\"color: #000000;\">However, the pre-pack mechanism <\/span><\/span><\/span><span style=\"font-size: 11pt;\"><span style=\"font-family: 'Book Antiqua',serif;\"><span style=\"color: #000000;\"><strong>allows for a Swiss challenge<\/strong><\/span><\/span><\/span><span style=\"font-size: 11pt;\"><span style=\"font-family: 'Book Antiqua',serif;\"><span style=\"color: #000000;\"> to any resolution plan that provides less than full recovery of dues for operational creditors.<\/span><\/span><\/span>\n<ul>\n<li style=\"list-style-type: square;\"><span style=\"font-size: 11pt;\"><span style=\"font-family: 'Book Antiqua',serif;\"><span style=\"color: #000000;\">Under the Swiss challenge mechanism, <\/span><\/span><\/span><span style=\"font-size: 11pt;\"><span style=\"font-family: 'Book Antiqua',serif;\"><span style=\"color: #000000;\"><strong>any third party <\/strong><\/span><\/span><\/span><span style=\"font-size: 11pt;\"><span style=\"font-family: 'Book Antiqua',serif;\"><span style=\"color: #000000;\">would be permitted to submit a resolution plan for the distressed company and the <\/span><\/span><\/span><span style=\"font-size: 11pt;\"><span style=\"font-family: 'Book Antiqua',serif;\"><span style=\"color: #000000;\"><strong>original applicant <\/strong><\/span><\/span><\/span><span style=\"font-size: 11pt;\"><span style=\"font-family: 'Book Antiqua',serif;\"><span style=\"color: #000000;\">would have to <\/span><\/span><\/span><span style=\"font-size: 11pt;\"><span style=\"font-family: 'Book Antiqua',serif;\"><span style=\"color: #000000;\"><strong>either match<\/strong><\/span><\/span><\/span><span style=\"font-size: 11pt;\"><span style=\"font-family: 'Book Antiqua',serif;\"><span style=\"color: #000000;\"> the improved resolution plan <\/span><\/span><\/span><span style=\"font-size: 11pt;\"><span style=\"font-family: 'Book Antiqua',serif;\"><span style=\"color: #000000;\"><strong>or forgo<\/strong><\/span><\/span><\/span><span style=\"font-size: 11pt;\"><span style=\"font-family: 'Book Antiqua',serif;\"><span style=\"color: #000000;\"> the investment.<\/span><\/span><\/span><\/li>\n<\/ul>\n<\/li>\n<li style=\"list-style-type: circle;\"><span style=\"font-size: 11pt;\"><span style=\"font-family: 'Book Antiqua',serif;\"><span style=\"color: #000000;\">Creditors are also permitted to<\/span><\/span><\/span><span style=\"font-size: 11pt;\"><span style=\"font-family: 'Book Antiqua',serif;\"><span style=\"color: #000000;\"><strong> seek resolution plans from any third party<\/strong><\/span><\/span><\/span><span style=\"font-size: 11pt;\"><span style=\"font-family: 'Book Antiqua',serif;\"><span style=\"color: #000000;\"> if they are not satisfied with the resolution plan put forth by the promoter.<\/span><\/span><\/span><\/li>\n<\/ul>\n<\/li>\n<li style=\"list-style-type: disc;\"><span style=\"font-size: 11pt;\"><span style=\"font-family: 'Book Antiqua',serif;\"><span style=\"color: #000000;\">It helps <\/span><\/span><\/span><span style=\"font-size: 11pt;\"><span style=\"font-family: 'Book Antiqua',serif;\"><span style=\"color: #000000;\"><strong>corporate debtors<\/strong><\/span><\/span><\/span><span style=\"font-size: 11pt;\"><span style=\"font-family: 'Book Antiqua',serif;\"><span style=\"color: #000000;\"> to enter into <\/span><\/span><\/span><span style=\"font-size: 11pt;\"><span style=\"font-family: 'Book Antiqua',serif;\"><span style=\"color: #000000;\"><strong>consensual restructuring<\/strong><\/span><\/span><\/span><span style=\"font-size: 11pt;\"><span style=\"font-family: 'Book Antiqua',serif;\"><span style=\"color: #000000;\"> with lenders and address the entire liability side of the company.<\/span><\/span><\/span><\/li>\n<\/ul>\n<p><span style=\"font-size: 11pt;\"><span style=\"font-family: 'Book Antiqua',serif;\"><span style=\"color: #000000;\"><strong><u>Challenges<\/u><\/strong><\/span><\/span><\/span><\/p>\n<ul>\n<li style=\"list-style-type: disc;\"><span style=\"font-size: 11pt;\"><span style=\"font-family: 'Book Antiqua',serif;\"><span style=\"color: #000000;\">According to experts, the <\/span><\/span><\/span><span style=\"font-size: 11pt;\"><span style=\"font-family: 'Book Antiqua',serif;\"><span style=\"color: #000000;\"><strong>timeline for the PIRP<\/strong><\/span><\/span><\/span> <span style=\"font-size: 11pt;\"><span style=\"font-family: 'Book Antiqua',serif;\"><span style=\"color: #000000;\"><strong>may be difficult to meet<\/strong><\/span><\/span><\/span><span style=\"font-size: 11pt;\"><span style=\"font-family: 'Book Antiqua',serif;\"><span style=\"color: #000000;\"> for lenders and distressed firms.<\/span><\/span><\/span><\/li>\n<li style=\"list-style-type: disc;\"><span style=\"font-size: 11pt;\"><span style=\"font-family: 'Book Antiqua',serif;\"><span style=\"color: #000000;\"><strong>Forensic audits were particularly important<\/strong><\/span><\/span><\/span><span style=\"font-size: 11pt;\"><span style=\"font-family: 'Book Antiqua',serif;\"><span style=\"color: #000000;\"> in cases where the control of the firm remains with the same management. Ordinarily where <\/span><\/span><\/span><span style=\"font-size: 11pt;\"><span style=\"font-family: 'Book Antiqua',serif;\"><span style=\"color: #000000;\"><strong>haircuts<\/strong><\/span><\/span><\/span><span style=\"font-size: 11pt;\"><span style=\"font-family: 'Book Antiqua',serif;\"><span style=\"color: #000000;\"> are involved, forensic\/transaction audits become imperative and a <\/span><\/span><\/span><span style=\"font-size: 11pt;\"><span style=\"font-family: 'Book Antiqua',serif;\"><span style=\"color: #000000;\"><strong>negative report becomes a roadblock<\/strong><\/span><\/span><\/span><span style=\"font-size: 11pt;\"><span style=\"font-family: 'Book Antiqua',serif;\"><span style=\"color: #000000;\"> in resolution involving the same management.<\/span><\/span><\/span>\n<ul>\n<li style=\"list-style-type: circle;\"><span style=\"font-size: 11pt;\"><span style=\"font-family: 'Book Antiqua',serif;\"><span style=\"color: #000000;\">The term <\/span><\/span><\/span><span style=\"font-size: 11pt;\"><span style=\"font-family: 'Book Antiqua',serif;\"><span style=\"color: #000000;\"><strong>haircut<\/strong><\/span><\/span><\/span><span style=\"font-size: 11pt;\"><span style=\"font-family: 'Book Antiqua',serif;\"><span style=\"color: #000000;\"> is most commonly used when referencing the <\/span><\/span><\/span><span style=\"font-size: 11pt;\"><span style=\"font-family: 'Book Antiqua',serif;\"><span style=\"color: #000000;\"><strong>percentage difference<\/strong><\/span><\/span><\/span><span style=\"font-size: 11pt;\"><span style=\"font-family: 'Book Antiqua',serif;\"><span style=\"color: #000000;\"> between an<\/span><\/span><\/span><span style=\"font-size: 11pt;\"><span style=\"font-family: 'Book Antiqua',serif;\"><span style=\"color: #000000;\"><strong> asset&#8217;s market value<\/strong><\/span><\/span><\/span><span style=\"font-size: 11pt;\"><span style=\"font-family: 'Book Antiqua',serif;\"><span style=\"color: #000000;\"> and the <\/span><\/span><\/span><span style=\"font-size: 11pt;\"><span style=\"font-family: 'Book Antiqua',serif;\"><span style=\"color: #000000;\"><strong>amount that can be used as collateral <\/strong><\/span><\/span><\/span><span style=\"font-size: 11pt;\"><span style=\"font-family: 'Book Antiqua',serif;\"><span style=\"color: #000000;\">for a loan.<\/span><\/span><\/span><\/li>\n<\/ul>\n<\/li>\n<li style=\"list-style-type: disc;\"><span style=\"font-size: 11pt;\"><span style=\"font-family: 'Book Antiqua',serif;\"><span style=\"color: #000000;\">If a <\/span><\/span><\/span><span style=\"font-size: 11pt;\"><span style=\"font-family: 'Book Antiqua',serif;\"><span style=\"color: #000000;\"><strong>firm restructures its outstanding debt<\/strong><\/span><\/span><\/span><span style=\"font-size: 11pt;\"><span style=\"font-family: 'Book Antiqua',serif;\"><span style=\"color: #000000;\"> through a PIRP with the existing management retaining control, the <\/span><\/span><\/span><span style=\"font-size: 11pt;\"><span style=\"font-family: 'Book Antiqua',serif;\"><span style=\"color: #000000;\"><strong>Non Performing Asset<\/strong><\/span><\/span><\/span><span style=\"font-size: 11pt;\"><span style=\"font-family: 'Book Antiqua',serif;\"><span style=\"color: #000000;\"> (NPA) <\/span><\/span><\/span><span style=\"font-size: 11pt;\"><span style=\"font-family: 'Book Antiqua',serif;\"><span style=\"color: #000000;\"><strong>status of the company\u2019s account with lenders may not be automatically upgraded<\/strong><\/span><\/span><\/span><span style=\"font-size: 11pt;\"><span style=\"font-family: 'Book Antiqua',serif;\"><span style=\"color: #000000;\"> under Reserve Bank of India (RBI) guidelines.<\/span><\/span><\/span><\/li>\n<li style=\"list-style-type: disc;\"><span style=\"font-size: 11pt;\"><span style=\"font-family: 'Book Antiqua',serif;\"><span style=\"color: #000000;\">It has also been noted that the <\/span><\/span><\/span><span style=\"font-size: 11pt;\"><span style=\"font-family: 'Book Antiqua',serif;\"><span style=\"color: #000000;\"><strong>debtor-in-possession model<\/strong><\/span><\/span><\/span><span style=\"font-size: 11pt;\"><span style=\"font-family: 'Book Antiqua',serif;\"><span style=\"color: #000000;\"> may militate against the Swiss challenge option, as the <\/span><\/span><\/span><span style=\"font-size: 11pt;\"><span style=\"font-family: 'Book Antiqua',serif;\"><span style=\"color: #000000;\"><strong>existing management may create hurdles<\/strong><\/span><\/span><\/span><span style=\"font-size: 11pt;\"><span style=\"font-family: 'Book Antiqua',serif;\"><span style=\"color: #000000;\"> for an outside investor seeking information to potentially invest in the company.<\/span><\/span><\/span>\n<ul>\n<li style=\"list-style-type: circle;\"><span style=\"font-size: 11pt;\"><span style=\"font-family: 'Book Antiqua',serif;\"><span style=\"color: #000000;\">Under CIRP, a resolution professional is in charge of running the company and providing information to potential investors.<\/span><\/span><\/span><\/li>\n<\/ul>\n<\/li>\n<\/ul>\n<p><span style=\"font-size: 11pt;\"><span style=\"font-family: 'Book Antiqua',serif;\"><span style=\"color: #000000;\"><strong><u>Way Forward<\/u><\/strong><\/span><\/span><\/span><\/p>\n<ul>\n<li style=\"list-style-type: disc;\"><span style=\"font-size: 11pt;\"><span style=\"font-family: 'Book Antiqua',serif;\"><span style=\"color: #000000;\">The government should consider setting up <\/span><\/span><\/span><span style=\"font-size: 11pt;\"><span style=\"font-family: 'Book Antiqua',serif;\"><span style=\"color: #000000;\"><strong>specific benches of the NCLT<\/strong><\/span><\/span><\/span><span style=\"font-size: 11pt;\"><span style=\"font-family: 'Book Antiqua',serif;\"><span style=\"color: #000000;\"> to deal with pre-pack resolution plans to ensure that they are <\/span><\/span><\/span><span style=\"font-size: 11pt;\"><span style=\"font-family: 'Book Antiqua',serif;\"><span style=\"color: #000000;\"><strong>implemented in a time-bound manner<\/strong><\/span><\/span><\/span><span style=\"font-size: 11pt;\"><span style=\"font-family: 'Book Antiqua',serif;\"><span style=\"color: #000000;\">.<\/span><\/span><\/span><\/li>\n<li style=\"list-style-type: disc;\"><span style=\"font-size: 11pt;\"><span style=\"font-family: 'Book Antiqua',serif;\"><span style=\"color: #000000;\">In order to <\/span><\/span><\/span><span style=\"font-size: 11pt;\"><span style=\"font-family: 'Book Antiqua',serif;\"><span style=\"color: #000000;\"><strong>motivate<\/strong><\/span><\/span><\/span><span style=\"font-size: 11pt;\"><span style=\"font-family: 'Book Antiqua',serif;\"><span style=\"color: #000000;\"> resolution under the PIRP, the<\/span><\/span><\/span><span style=\"font-size: 11pt;\"><span style=\"font-family: 'Book Antiqua',serif;\"><span style=\"color: #000000;\"><strong> RBI guidelines on account status may be aligned with the objective of IBC<\/strong><\/span><\/span><\/span><span style=\"font-size: 11pt;\"><span style=\"font-family: 'Book Antiqua',serif;\"><span style=\"color: #000000;\">.<\/span><\/span><\/span><\/li>\n<li style=\"list-style-type: disc;\"><span style=\"font-size: 11pt;\"><span style=\"font-family: 'Book Antiqua',serif;\"><span style=\"color: #000000;\">The <\/span><\/span><\/span><span style=\"font-size: 11pt;\"><span style=\"font-family: 'Book Antiqua',serif;\"><span style=\"color: #000000;\"><strong>lenders<\/strong><\/span><\/span><\/span><span style=\"font-size: 11pt;\"><span style=\"font-family: 'Book Antiqua',serif;\"><span style=\"color: #000000;\"> may be given the <\/span><\/span><\/span><span style=\"font-size: 11pt;\"><span style=\"font-family: 'Book Antiqua',serif;\"><span style=\"color: #000000;\"><strong>benefit of account upgradation<\/strong><\/span><\/span><\/span><span style=\"font-size: 11pt;\"><span style=\"font-family: 'Book Antiqua',serif;\"><span style=\"color: #000000;\"> upon resolution. There is a need for the <\/span><\/span><\/span><span style=\"font-size: 11pt;\"><span style=\"font-family: 'Book Antiqua',serif;\"><span style=\"color: #000000;\"><strong>Insolvency and Bankruptcy Board of India<\/strong><\/span><\/span><\/span><span style=\"font-size: 11pt;\"><span style=\"font-family: 'Book Antiqua',serif;\"><span style=\"color: #000000;\"> (IBBI) and RBI to find middle ground on these regulations to make the PIRP more attractive.<\/span><\/span><\/span><\/li>\n<li style=\"list-style-type: disc;\"><span style=\"font-size: 11pt;\"><span style=\"font-family: 'Book Antiqua',serif;\"><span style=\"color: #000000;\">The pre-pack mechanism is<\/span><\/span><\/span><span style=\"font-size: 11pt;\"><span style=\"font-family: 'Book Antiqua',serif;\"><span style=\"color: #000000;\"><strong> effective in arriving at a quick resolution<\/strong><\/span><\/span><\/span><span style=\"font-size: 11pt;\"><span style=\"font-family: 'Book Antiqua',serif;\"><span style=\"color: #000000;\"> so it should be <\/span><\/span><\/span><span style=\"font-size: 11pt;\"><span style=\"font-family: 'Book Antiqua',serif;\"><span style=\"color: #000000;\"><strong>rolled out to all corporations <\/strong><\/span><\/span><\/span><span style=\"font-size: 11pt;\"><span style=\"font-family: 'Book Antiqua',serif;\"><span style=\"color: #000000;\">over time as legal issues are settled through case law.<\/span><\/span><\/span><\/li>\n<\/ul>\n<div>\n<table style=\"border-collapse: collapse; border: none; table-layout: fixed; width: 624px;\" cellspacing=\"0\">\n<tbody>\n<tr>\n<td style=\"background-color: #fff2cc; vertical-align: top; border: 1px solid #000000;\"><span style=\"font-size: 11pt;\"><span style=\"font-family: 'Book Antiqua',serif;\"><span style=\"color: #000000;\"><strong><u>Insolvency and Bankruptcy Code, 2016<\/u><\/strong><\/span><\/span><\/span><\/p>\n<ul>\n<li style=\"list-style-type: disc;\"><span style=\"font-size: 11pt;\"><span style=\"font-family: 'Book Antiqua',serif;\"><span style=\"color: #000000;\">It is the <\/span><\/span><\/span><span style=\"font-size: 11pt;\"><span style=\"font-family: 'Book Antiqua',serif;\"><span style=\"color: #000000;\"><strong>bankruptcy law of India<\/strong><\/span><\/span><\/span><span style=\"font-size: 11pt;\"><span style=\"font-family: 'Book Antiqua',serif;\"><span style=\"color: #000000;\"> which seeks to consolidate the existing framework by creating a <\/span><\/span><\/span><span style=\"font-size: 11pt;\"><span style=\"font-family: 'Book Antiqua',serif;\"><span style=\"color: #000000;\"><strong>single law for insolvency and bankruptcy<\/strong><\/span><\/span><\/span><span style=\"font-size: 11pt;\"><span style=\"font-family: 'Book Antiqua',serif;\"><span style=\"color: #000000;\"> and was implemented through an act of<\/span><\/span><\/span><span style=\"font-size: 11pt;\"><span style=\"font-family: 'Book Antiqua',serif;\"><span style=\"color: #000000;\"><strong> Parliament<\/strong><\/span><\/span><\/span><span style=\"font-size: 11pt;\"><span style=\"font-family: 'Book Antiqua',serif;\"><span style=\"color: #000000;\">.<\/span><\/span><\/span>\n<ul>\n<li style=\"list-style-type: circle;\"><span style=\"font-size: 11pt;\"><span style=\"font-family: 'Book Antiqua',serif;\"><span style=\"color: #000000;\">The law was necessitated due to a<\/span><\/span><\/span><span style=\"font-size: 11pt;\"><span style=\"font-family: 'Book Antiqua',serif;\"><span style=\"color: #000000;\"><strong> huge pile-up of non-performing loans<\/strong><\/span><\/span><\/span><span style=\"font-size: 11pt;\"><span style=\"font-family: 'Book Antiqua',serif;\"><span style=\"color: #000000;\"> of banks and a delay in debt resolution.<\/span><\/span><\/span><\/li>\n<li style=\"list-style-type: circle;\"><span style=\"font-size: 11pt;\"><span style=\"font-family: 'Book Antiqua',serif;\"><span style=\"color: #000000;\"><strong>Insolvency:<\/strong><\/span><\/span><\/span><span style=\"font-size: 11pt;\"><span style=\"font-family: 'Book Antiqua',serif;\"><span style=\"color: #000000;\"> Situation where individuals or companies are unable to repay their outstanding debt.<\/span><\/span><\/span><\/li>\n<li style=\"list-style-type: circle;\"><span style=\"font-size: 11pt;\"><span style=\"font-family: 'Book Antiqua',serif;\"><span style=\"color: #000000;\"><strong>Bankruptcy: <\/strong><\/span><\/span><\/span><span style=\"font-size: 11pt;\"><span style=\"font-family: 'Book Antiqua',serif;\"><span style=\"color: #000000;\">Situation whereby a court of competent jurisdiction has declared a person or other entity insolvent, having passed appropriate orders to resolve it and protect the rights of the creditors.\u00a0<\/span><\/span><\/span><\/li>\n<\/ul>\n<\/li>\n<li style=\"list-style-type: disc;\"><span style=\"font-size: 11pt;\"><span style=\"font-family: 'Book Antiqua',serif;\"><span style=\"color: #000000;\"><strong>Aim: <\/strong><\/span><\/span><\/span><span style=\"font-size: 11pt;\"><span style=\"font-family: 'Book Antiqua',serif;\"><span style=\"color: #000000;\">To protect the <\/span><\/span><\/span><span style=\"font-size: 11pt;\"><span style=\"font-family: 'Book Antiqua',serif;\"><span style=\"color: #000000;\"><strong>interests of small investors<\/strong><\/span><\/span><\/span><span style=\"font-size: 11pt;\"><span style=\"font-family: 'Book Antiqua',serif;\"><span style=\"color: #000000;\"> and make the process of doing the business <\/span><\/span><\/span><span style=\"font-size: 11pt;\"><span style=\"font-family: 'Book Antiqua',serif;\"><span style=\"color: #000000;\"><strong>less cumbersome<\/strong><\/span><\/span><\/span><span style=\"font-size: 11pt;\"><span style=\"font-family: 'Book Antiqua',serif;\"><span style=\"color: #000000;\">.<\/span><\/span><\/span><\/li>\n<li style=\"list-style-type: disc;\"><span style=\"font-size: 11pt;\"><span style=\"font-family: 'Book Antiqua',serif;\"><span style=\"color: #000000;\">IBC applies to <\/span><\/span><\/span><span style=\"font-size: 11pt;\"><span style=\"font-family: 'Book Antiqua',serif;\"><span style=\"color: #000000;\"><strong>companies<\/strong><\/span><\/span><\/span><span style=\"font-size: 11pt;\"><span style=\"font-family: 'Book Antiqua',serif;\"><span style=\"color: #000000;\">,<\/span><\/span><\/span><span style=\"font-size: 11pt;\"><span style=\"font-family: 'Book Antiqua',serif;\"><span style=\"color: #000000;\"><strong> partnerships and individuals <\/strong><\/span><\/span><\/span><span style=\"font-size: 11pt;\"><span style=\"font-family: 'Book Antiqua',serif;\"><span style=\"color: #000000;\">and provides a <\/span><\/span><\/span><span style=\"font-size: 11pt;\"><span style=\"font-family: 'Book Antiqua',serif;\"><span style=\"color: #000000;\"><strong>time-bound process<\/strong><\/span><\/span><\/span><span style=\"font-size: 11pt;\"><span style=\"font-family: 'Book Antiqua',serif;\"><span style=\"color: #000000;\"> to resolve insolvency.\u00a0<\/span><\/span><\/span>\n<ul>\n<li style=\"list-style-type: circle;\"><span style=\"font-size: 11pt;\"><span style=\"font-family: 'Book Antiqua',serif;\"><span style=\"color: #000000;\">When a <\/span><\/span><\/span><span style=\"font-size: 11pt;\"><span style=\"font-family: 'Book Antiqua',serif;\"><span style=\"color: #000000;\"><strong>default <\/strong><\/span><\/span><\/span><span style=\"font-size: 11pt;\"><span style=\"font-family: 'Book Antiqua',serif;\"><span style=\"color: #000000;\">in<\/span><\/span><\/span><span style=\"font-size: 11pt;\"><span style=\"font-family: 'Book Antiqua',serif;\"><span style=\"color: #000000;\"><strong> repayment occurs<\/strong><\/span><\/span><\/span><span style=\"font-size: 11pt;\"><span style=\"font-family: 'Book Antiqua',serif;\"><span style=\"color: #000000;\">, <\/span><\/span><\/span><span style=\"font-size: 11pt;\"><span style=\"font-family: 'Book Antiqua',serif;\"><span style=\"color: #000000;\"><strong>creditors gain control<\/strong><\/span><\/span><\/span><span style=\"font-size: 11pt;\"><span style=\"font-family: 'Book Antiqua',serif;\"><span style=\"color: #000000;\"> over the <\/span><\/span><\/span><span style=\"font-size: 11pt;\"><span style=\"font-family: 'Book Antiqua',serif;\"><span style=\"color: #000000;\"><strong>debtor\u2019s assets<\/strong><\/span><\/span><\/span><span style=\"font-size: 11pt;\"><span style=\"font-family: 'Book Antiqua',serif;\"><span style=\"color: #000000;\"> and must make decisions to resolve insolvency.<\/span><\/span><\/span><\/li>\n<li style=\"list-style-type: circle;\"><span style=\"font-size: 11pt;\"><span style=\"font-family: 'Book Antiqua',serif;\"><span style=\"color: #000000;\">Under IBC, <\/span><\/span><\/span><span style=\"font-size: 11pt;\"><span style=\"font-family: 'Book Antiqua',serif;\"><span style=\"color: #000000;\"><strong>debtor<\/strong><\/span><\/span><\/span><span style=\"font-size: 11pt;\"><span style=\"font-family: 'Book Antiqua',serif;\"><span style=\"color: #000000;\"> and <\/span><\/span><\/span><span style=\"font-size: 11pt;\"><span style=\"font-family: 'Book Antiqua',serif;\"><span style=\"color: #000000;\"><strong>creditor<\/strong><\/span><\/span><\/span> <span style=\"font-size: 11pt;\"><span style=\"font-family: 'Book Antiqua',serif;\"><span style=\"color: #000000;\"><strong>both can start \u2018recovery\u2019 proceedings<\/strong><\/span><\/span><\/span><span style=\"font-size: 11pt;\"><span style=\"font-family: 'Book Antiqua',serif;\"><span style=\"color: #000000;\"> against each other.<\/span><\/span><\/span><\/li>\n<\/ul>\n<\/li>\n<li style=\"list-style-type: disc;\"><span style=\"font-size: 11pt;\"><span style=\"font-family: 'Book Antiqua',serif;\"><span style=\"color: #000000;\"><strong>Timelines:<\/strong><\/span><\/span><\/span><span style=\"font-size: 11pt;\"><span style=\"font-family: 'Book Antiqua',serif;\"><span style=\"color: #000000;\"> Companies have to complete the <\/span><\/span><\/span><span style=\"font-size: 11pt;\"><span style=\"font-family: 'Book Antiqua',serif;\"><span style=\"color: #000000;\"><strong>entire insolvency exercise within 180 days<\/strong><\/span><\/span><\/span><span style=\"font-size: 11pt;\"><span style=\"font-family: 'Book Antiqua',serif;\"><span style=\"color: #000000;\"> under IBC and the <\/span><\/span><\/span><span style=\"font-size: 11pt;\"><span style=\"font-family: 'Book Antiqua',serif;\"><span style=\"color: #000000;\"><strong>deadline may be extended<\/strong><\/span><\/span><\/span><span style=\"font-size: 11pt;\"><span style=\"font-family: 'Book Antiqua',serif;\"><span style=\"color: #000000;\"> if the creditors<\/span><\/span><\/span><span style=\"font-size: 11pt;\"><span style=\"font-family: 'Book Antiqua',serif;\"><span style=\"color: #000000;\"><strong> do not raise objections<\/strong><\/span><\/span><\/span><span style=\"font-size: 11pt;\"><span style=\"font-family: 'Book Antiqua',serif;\"><span style=\"color: #000000;\"> to the extension.\u00a0<\/span><\/span><\/span><\/li>\n<li style=\"list-style-type: disc;\"><span style=\"font-size: 11pt;\"><span style=\"font-family: 'Book Antiqua',serif;\"><span style=\"color: #000000;\"><strong>Regulator: <\/strong><\/span><\/span><\/span><span style=\"font-size: 11pt;\"><span style=\"font-family: 'Book Antiqua',serif;\"><span style=\"color: #000000;\">The <\/span><\/span><\/span><span style=\"font-size: 11pt;\"><span style=\"font-family: 'Book Antiqua',serif;\"><span style=\"color: #000000;\"><strong>IBBI<\/strong><\/span><\/span><\/span><span style=\"font-size: 11pt;\"><span style=\"font-family: 'Book Antiqua',serif;\"><span style=\"color: #000000;\"> has been appointed as a <\/span><\/span><\/span><span style=\"font-size: 11pt;\"><span style=\"font-family: 'Book Antiqua',serif;\"><span style=\"color: #000000;\"><strong>regulator<\/strong><\/span><\/span><\/span><span style=\"font-size: 11pt;\"><span style=\"font-family: 'Book Antiqua',serif;\"><span style=\"color: #000000;\"> and <\/span><\/span><\/span><span style=\"font-size: 11pt;\"><span style=\"font-family: 'Book Antiqua',serif;\"><span style=\"color: #000000;\"><strong>can oversee<\/strong><\/span><\/span><\/span><span style=\"font-size: 11pt;\"><span style=\"font-family: 'Book Antiqua',serif;\"><span style=\"color: #000000;\"> the proceedings.<\/span><\/span><\/span>\n<ul>\n<li style=\"list-style-type: circle;\"><span style=\"font-size: 11pt;\"><span style=\"font-family: 'Book Antiqua',serif;\"><span style=\"color: #000000;\">It consists of representatives of the RBI and the Ministries of Finance, Corporate Affairs and Law.<\/span><\/span><\/span><\/li>\n<\/ul>\n<\/li>\n<li style=\"list-style-type: disc;\"><span style=\"font-size: 11pt;\"><span style=\"font-family: 'Book Antiqua',serif;\"><span style=\"color: #000000;\"><strong>Key Components of IBC in Resolution Process<\/strong><\/span><\/span><\/span>\n<ul>\n<li style=\"list-style-type: circle;\"><span style=\"font-size: 11pt;\"><span style=\"font-family: 'Book Antiqua',serif;\"><span style=\"color: #000000;\"><strong>Insolvency Professionals: <\/strong><\/span><\/span><\/span><span style=\"font-size: 11pt;\"><span style=\"font-family: 'Book Antiqua',serif;\"><span style=\"color: #000000;\">These administer the resolution process, manage the assets of the debtor, and provide information for creditors to assist them in decision making.<\/span><\/span><\/span><\/li>\n<li style=\"list-style-type: circle;\"><span style=\"font-size: 11pt;\"><span style=\"font-family: 'Book Antiqua',serif;\"><span style=\"color: #000000;\"><strong>Insolvency Professional Agencies: <\/strong><\/span><\/span><\/span><span style=\"font-size: 11pt;\"><span style=\"font-family: 'Book Antiqua',serif;\"><span style=\"color: #000000;\">These conduct examinations to certify the insolvency professionals and enforce a code of conduct for their performance.<\/span><\/span><\/span><\/li>\n<li style=\"list-style-type: circle;\"><span style=\"font-size: 11pt;\"><span style=\"font-family: 'Book Antiqua',serif;\"><span style=\"color: #000000;\"><strong>Information Utilities: <\/strong><\/span><\/span><\/span><span style=\"font-size: 11pt;\"><span style=\"font-family: 'Book Antiqua',serif;\"><span style=\"color: #000000;\">Creditors report financial information of the debt owed to them by the debtor. Such information includes records of debt, liabilities and defaults.<\/span><\/span><\/span><\/li>\n<li style=\"list-style-type: circle;\"><span style=\"font-size: 11pt;\"><span style=\"font-family: 'Book Antiqua',serif;\"><span style=\"color: #000000;\"><strong>Adjudicating Authority:<\/strong><\/span><\/span><\/span><span style=\"font-size: 11pt;\"><span style=\"font-family: 'Book Antiqua',serif;\"><span style=\"color: #000000;\"> The proceedings of the resolution process is adjudicated by<\/span><\/span><\/span>\n<ul>\n<li style=\"list-style-type: square;\"><span style=\"font-size: 11pt;\"><span style=\"font-family: 'Book Antiqua',serif;\"><span style=\"color: #000000;\"><strong>National Companies Law Tribunal <\/strong><\/span><\/span><\/span><span style=\"font-size: 11pt;\"><span style=\"font-family: 'Book Antiqua',serif;\"><span style=\"color: #000000;\">(NCLT) for companies and limited liability partnerships.<\/span><\/span><\/span><\/li>\n<li style=\"list-style-type: square;\"><span style=\"font-size: 11pt;\"><span style=\"font-family: 'Book Antiqua',serif;\"><span style=\"color: #000000;\"><strong>Debt Recovery Tribunal <\/strong><\/span><\/span><\/span><span style=\"font-size: 11pt;\"><span style=\"font-family: 'Book Antiqua',serif;\"><span style=\"color: #000000;\">(DRT) for individuals.<\/span><\/span><\/span><\/li>\n<\/ul>\n<\/li>\n<li style=\"list-style-type: circle;\"><span style=\"font-size: 11pt;\"><span style=\"font-family: 'Book Antiqua',serif;\"><span style=\"color: #000000;\"><strong>Committee of Creditors:<\/strong><\/span><\/span><\/span><span style=\"font-size: 11pt;\"><span style=\"font-family: 'Book Antiqua',serif;\"><span style=\"color: #000000;\"> It consists of the financial creditors who lent money to the debtor and decides the future of the outstanding debt owed to them.<\/span><\/span><\/span>\n<ul>\n<li style=\"list-style-type: square;\"><span style=\"font-size: 11pt;\"><span style=\"font-family: 'Book Antiqua',serif;\"><span style=\"color: #000000;\">They may choose to revive the debt owed to them by changing the repayment schedule or selling the assets of the debtor to get their dues back.<\/span><\/span><\/span><\/li>\n<li style=\"list-style-type: square;\"><span style=\"font-size: 11pt;\"><span style=\"font-family: 'Book Antiqua',serif;\"><span style=\"color: #000000;\">If a decision is not taken in 180 days, the debtor\u2019s assets go into liquidation.<\/span><\/span><\/span><\/li>\n<li style=\"list-style-type: square;\"><span style=\"font-size: 11pt;\"><span style=\"font-family: 'Book Antiqua',serif;\"><span style=\"color: #000000;\">The minimum vote required to approve the resolution plan is 75 per cent in a meeting of COC.<\/span><\/span><\/span><\/li>\n<\/ul>\n<\/li>\n<li style=\"list-style-type: circle;\"><span style=\"font-size: 11pt;\"><span style=\"font-family: 'Book Antiqua',serif;\"><span style=\"color: #000000;\"><strong>Order of Proceeds from Sale: <\/strong><\/span><\/span><\/span><span style=\"font-size: 11pt;\"><span style=\"font-family: 'Book Antiqua',serif;\"><span style=\"color: #000000;\">If a company goes under liquidation, proceeds from the sale of the debtor\u2019s assets are distributed in the following order<\/span><\/span><\/span>\n<ul>\n<li style=\"list-style-type: square;\"><span style=\"font-size: 11pt;\"><span style=\"font-family: 'Book Antiqua',serif;\"><span style=\"color: #000000;\"><strong>First:<\/strong><\/span><\/span><\/span><span style=\"font-size: 11pt;\"><span style=\"font-family: 'Book Antiqua',serif;\"><span style=\"color: #000000;\"> Insolvency resolution costs, including the remuneration to the insolvency professional.<\/span><\/span><\/span><\/li>\n<li style=\"list-style-type: square;\"><span style=\"font-size: 11pt;\"><span style=\"font-family: 'Book Antiqua',serif;\"><span style=\"color: #000000;\"><strong>Second: <\/strong><\/span><\/span><\/span><span style=\"font-size: 11pt;\"><span style=\"font-family: 'Book Antiqua',serif;\"><span style=\"color: #000000;\">Secured creditors, whose loans are backed by collateral.<\/span><\/span><\/span><\/li>\n<li style=\"list-style-type: square;\"><span style=\"font-size: 11pt;\"><span style=\"font-family: 'Book Antiqua',serif;\"><span style=\"color: #000000;\"><strong>Third: <\/strong><\/span><\/span><\/span><span style=\"font-size: 11pt;\"><span style=\"font-family: 'Book Antiqua',serif;\"><span style=\"color: #000000;\">Dues to workers, other employees.<\/span><\/span><\/span><\/li>\n<li style=\"list-style-type: square;\"><span style=\"font-size: 11pt;\"><span style=\"font-family: 'Book Antiqua',serif;\"><span style=\"color: #000000;\"><strong>Fourth:<\/strong><\/span><\/span><\/span><span style=\"font-size: 11pt;\"><span style=\"font-family: 'Book Antiqua',serif;\"><span style=\"color: #000000;\"> Unsecured creditors.<\/span><\/span><\/span><\/li>\n<\/ul>\n<\/li>\n<\/ul>\n<\/li>\n<\/ul>\n<p><span style=\"font-size: 11pt;\"><span style=\"font-family: 'Book Antiqua',serif;\"><span style=\"color: #000000;\"><strong><u>Corporate Insolvency Resolution Process<\/u><\/strong><\/span><\/span><\/span><\/p>\n<ul>\n<li style=\"list-style-type: disc;\"><span style=\"font-size: 11pt;\"><span style=\"font-family: 'Book Antiqua',serif;\"><span style=\"color: #000000;\">The CIRP may include necessary steps to <\/span><\/span><\/span><span style=\"font-size: 11pt;\"><span style=\"font-family: 'Book Antiqua',serif;\"><span style=\"color: #000000;\"><strong>revive the company<\/strong><\/span><\/span><\/span><span style=\"font-size: 11pt;\"><span style=\"font-family: 'Book Antiqua',serif;\"><span style=\"color: #000000;\"> such as<\/span><\/span><\/span><span style=\"font-size: 11pt;\"><span style=\"font-family: 'Book Antiqua',serif;\"><span style=\"color: #000000;\"><strong> raising fresh<\/strong><\/span><\/span><\/span> <span style=\"font-size: 11pt;\"><span style=\"font-family: 'Book Antiqua',serif;\"><span style=\"color: #000000;\"><strong>funds for operation, looking for a new buye<\/strong><\/span><\/span><\/span><span style=\"font-size: 11pt;\"><span style=\"font-family: 'Book Antiqua',serif;\"><span style=\"color: #000000;\">r to sell the company as a going concern.\u00a0<\/span><\/span><\/span><\/li>\n<li style=\"list-style-type: disc;\"><span style=\"font-size: 11pt;\"><span style=\"font-family: 'Book Antiqua',serif;\"><span style=\"color: #000000;\">The <\/span><\/span><\/span><span style=\"font-size: 11pt;\"><span style=\"font-family: 'Book Antiqua',serif;\"><span style=\"color: #000000;\"><strong>outstanding debts<\/strong><\/span><\/span><\/span><span style=\"font-size: 11pt;\"><span style=\"font-family: 'Book Antiqua',serif;\"><span style=\"color: #000000;\"> may be satisfied by way of another person submitting a <\/span><\/span><\/span><span style=\"font-size: 11pt;\"><span style=\"font-family: 'Book Antiqua',serif;\"><span style=\"color: #000000;\"><strong>Resolution plan<\/strong><\/span><\/span><\/span><span style=\"font-size: 11pt;\"><span style=\"font-family: 'Book Antiqua',serif;\"><span style=\"color: #000000;\"> to take over the <\/span><\/span><\/span><span style=\"font-size: 11pt;\"><span style=\"font-family: 'Book Antiqua',serif;\"><span style=\"color: #000000;\"><strong>company and pay off the remaining debts<\/strong><\/span><\/span><\/span><span style=\"font-size: 11pt;\"><span style=\"font-family: 'Book Antiqua',serif;\"><span style=\"color: #000000;\">.<\/span><\/span><\/span><\/li>\n<li style=\"list-style-type: disc;\"><span style=\"font-size: 11pt;\"><span style=\"font-family: 'Book Antiqua',serif;\"><span style=\"color: #000000;\">In the event a <\/span><\/span><\/span><span style=\"font-size: 11pt;\"><span style=\"font-family: 'Book Antiqua',serif;\"><span style=\"color: #000000;\"><strong>resolution plan is not submitted<\/strong><\/span><\/span><\/span><span style=\"font-size: 11pt;\"><span style=\"font-family: 'Book Antiqua',serif;\"><span style=\"color: #000000;\"> or <\/span><\/span><\/span><span style=\"font-size: 11pt;\"><span style=\"font-family: 'Book Antiqua',serif;\"><span style=\"color: #000000;\"><strong>not approved<\/strong><\/span><\/span><\/span><span style=\"font-size: 11pt;\"><span style=\"font-family: 'Book Antiqua',serif;\"><span style=\"color: #000000;\"> by the <\/span><\/span><\/span><span style=\"font-size: 11pt;\"><span style=\"font-family: 'Book Antiqua',serif;\"><span style=\"color: #000000;\"><strong>COC<\/strong><\/span><\/span><\/span><span style=\"font-size: 11pt;\"><span style=\"font-family: 'Book Antiqua',serif;\"><span style=\"color: #000000;\">, the <\/span><\/span><\/span><span style=\"font-size: 11pt;\"><span style=\"font-family: 'Book Antiqua',serif;\"><span style=\"color: #000000;\"><strong>CIRP<\/strong><\/span><\/span><\/span><span style=\"font-size: 11pt;\"><span style=\"font-family: 'Book Antiqua',serif;\"><span style=\"color: #000000;\"> process is deemed to have <\/span><\/span><\/span><span style=\"font-size: 11pt;\"><span style=\"font-family: 'Book Antiqua',serif;\"><span style=\"color: #000000;\"><strong>failed<\/strong><\/span><\/span><\/span><span style=\"font-size: 11pt;\"><span style=\"font-family: 'Book Antiqua',serif;\"><span style=\"color: #000000;\">.\u00a0<\/span><\/span><\/span>\n<ul>\n<li style=\"list-style-type: circle;\"><span style=\"font-size: 11pt;\"><span style=\"font-family: 'Book Antiqua',serif;\"><span style=\"color: #000000;\">In such a situation the<\/span><\/span><\/span><span style=\"font-size: 11pt;\"><span style=\"font-family: 'Book Antiqua',serif;\"><span style=\"color: #000000;\"><strong> liquidation proceeds<\/strong><\/span><\/span><\/span><span style=\"font-size: 11pt;\"><span style=\"font-family: 'Book Antiqua',serif;\"><span style=\"color: #000000;\">.<\/span><\/span><\/span><\/li>\n<\/ul>\n<\/li>\n<\/ul>\n<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n<\/div>\n<p><span style=\"font-size: 11pt;\"><span style=\"font-family: 'Book Antiqua',serif;\"><span style=\"color: #000000;\">Source: <\/span><\/span><\/span><a style=\"text-decoration: none;\" href=\"https:\/\/indianexpress.com\/article\/explained\/explained-pre-packaged-insolvency-resolution-process-of-msmes-7426810\/\" target=\"_blank\" rel=\"noopener\"><span style=\"font-size: 11pt;\"><span style=\"font-family: 'Book Antiqua',serif;\"><span style=\"color: #1155cc;\"><u>IE<\/u><\/span><\/span><\/span><\/a><\/p>\n","protected":false},"excerpt":{"rendered":"<p>In News Recently, the Insolvency and Bankruptcy Code (IBC) (Amendment) Bill, 2021 has been passed by the Lok Sabha. Insolvency and Bankruptcy Code (Amendment) Bill, 2021 It proposed the Pre-packaged Insolvency Resolution Process (PIRP), also called \u2018pre-packs\u2019 as an insolvency resolution mechanism for Micro, Small and Medium Enterprises (MSMEs). It will replace the Insolvency and [&hellip;]<\/p>\n","protected":false},"author":1,"featured_media":12273,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[21],"tags":[31,62,30,26,46,105],"class_list":["post-12272","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-current-affairs","tag-government-policies-interventions","tag-growth-development","tag-gs-2","tag-gs-3","tag-indian-economy-related-issues","tag-planning"],"acf":[],"jetpack_featured_media_url":"https:\/\/wp-images.nextias.com\/cdn-cgi\/image\/format=auto\/ca\/uploads\/2023\/07\/6016163current-affairs.jpg","_links":{"self":[{"href":"https:\/\/www.nextias.com\/ca\/wp-json\/wp\/v2\/posts\/12272","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.nextias.com\/ca\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.nextias.com\/ca\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.nextias.com\/ca\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.nextias.com\/ca\/wp-json\/wp\/v2\/comments?post=12272"}],"version-history":[{"count":1,"href":"https:\/\/www.nextias.com\/ca\/wp-json\/wp\/v2\/posts\/12272\/revisions"}],"predecessor-version":[{"id":25641,"href":"https:\/\/www.nextias.com\/ca\/wp-json\/wp\/v2\/posts\/12272\/revisions\/25641"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.nextias.com\/ca\/wp-json\/wp\/v2\/media\/12273"}],"wp:attachment":[{"href":"https:\/\/www.nextias.com\/ca\/wp-json\/wp\/v2\/media?parent=12272"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.nextias.com\/ca\/wp-json\/wp\/v2\/categories?post=12272"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.nextias.com\/ca\/wp-json\/wp\/v2\/tags?post=12272"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}