Step 1: Application to NCLT

A financial or operational creditor of the company or the company itself can apply to the National Company Law Tribunal (NCLT). The application is made to admit that the Company (Corporate Debtor as per IBC) is in the corporate insolvency resolution process. For this, the creditor needs to show the default payment of a debt which exceeds INR 1,00,000 and within 14 days the NCLT has to pass an order either admitting or denying the application. There are different obligations that a financial and an operational creditor have to comply with when making their applications before NCLT. A financial creditor needs to submit the record of the default whereas an operational creditor needs to first make a demand for his unpaid debt. On the basis of an ongoing dispute, it is open to the corporate debtor to defend the claim.

Step 2: Interim Resolution Professional & Moratorium: When a corporate debtor is admitted into the CIRP, it suspends the board of directors. Also, the management is placed under an independent ‘interim resolution professional’.  Further, from this point onward the management ceases to have any control over the company affairs till the end of the CIRP. Simultaneously, a moratorium becomes effective which prohibits:

• Continuation or initiation of any legal proceedings against the corporate debtor
• Transfer of its assets
• Enforcement of any security interest
• Recovery of any property from it by an owner
• Suspension or termination of the supply of essential goods and services, the moratorium lasts till the corporate debtor is in CIRP

Step 3: Verification and Analysis of Claims: At this stage, an interim resolution professional will summon and verify the claims made by the creditors and also classify them. After that, within 30 days of acceptance into CIRP, will form a Committee of Creditors (COC) which comprises all the financial creditors of the corporate debtor.

Step 4: Appointment of Resolution Professional: Within seven days of the forming the committee, the COC will have to either resolve to appoint the interim resolution professional as a resolution professional or to replace the interim resolution professional by another resolution professional.

Step 5: Approval of the “Resolution Plan”: A resolution plan for the revival of the company must be approved within 180 days from the commencement of CIRP by creditors. The NCLT can extend this period by another 90 days. Any person, management, creditors or a third party can propose such a plan. The resolution professional is responsible to ensure that the plan meets the criteria set out in Insolvency and Bankruptcy Code, 2016.

• If a plan is approved within this period and sanctioned by NCLT: The approved resolution plan becomes binding on the corporate debtor and its employees, members, creditors, guarantors and other stakeholders involved in the resolution plan. It is the duty if the resolution professional to obtain all necessary approvals required under any law for the time being in force within one-year from the date of approval by adjudicating authority.
• If no resolution plan is approved within the said period: In case the resolution plan is not approved then NCLT is obliged to order the liquidation of the corporate debtor. After the approval of liquidation, COC appoints the liquidator to sell the assets of the corporate debtor and share them among the stakeholders. The distribution is made according to section 53 of the Insolvency and Bankruptcy Code 2016.

For more assistance on fast track insolvency resolution process, corporate insolvency process or Corporate Insolvency Resolution companies in India or Corporate Insolvency Resolution Advisors in India do speak with our financial advisor or send us a request for a call back.