Benefits Of IBC For Corporate.
A single law for insolvency and bankruptcy in India is Insolvency and bankruptcy code,2016. This code was introduced in Lower house in December,2015 and passed on 5 May,2016.
This code was framed to resolve insolvency as this problem is prevailing in India from so long by this code the interests of small investors can be protected.
Features of this code.
- Separate insolvency resolution processes for individuals, companies and partnership firms. Either debtor or Creditor can initiate the process. For corporates and individuals maximum time limit for completion of insolvency resolution process has been set.
For companies : process has to be completed in 180 days which may extend by 90 days if majority of creditors agree.
For start ups, small companies and other companies: process has to be completed within 90 days which may extend to 45 days.
- Insolvency and bankruptcy board of India is established by this code to overlook the insolvency proceedings in the country . Board will consist of 10 members including representatives from ministers of finance and law and Reserve bank of India .
- Licensed professionals will only manage insolvency process . They will also control the assets of the debtor.
- Two tribunals are proposed by this code to see the process of insolvency resolution.
- National company law tribunal for companies and limited liability partnership firms.
- Debt recovery tribunal for individuals and partnerships.
Procedure of this code.
Financial or operation creditors or corporate debtor can submit the plea of insolvency to adjudicating authority. 14 days is maximum time to accept or reject the plea.
Insolvency resolution professional is appointed by tribunal if plea is accepted which will draft a plan within 180 days whichcan extend to 90 days . They can also seek the support of company’s management for day to day operationsinformation.Meanwhile board of directors of company stands suspended and promoters do not have any right to say in the matter.
Amendments to the act.
- Wilful defaulters .
- Promoters or management of the company if they have debt over a year.
- Disqualified directors.
These persons are prohibited for submitting a resolution plan .
It also bars the sale of property of defaulter to persons during liquidation.
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