Bridge Financial Gaps with Interim Finance Solutions under IBC
Navigate the insolvency landscape with our specialized interim finance solutions under the Insolvency and Bankruptcy Code (IBC). We provide the financial bridge to facilitate the restructuring process.
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The IBC provides specific provisions for raising interim finance by the resolution professional for the purposes of protecting and preserving the value of the property of the company and managing its operations as a going concern – and consequently achieve a viable resolution plan for the company. The IBC classifies all interim finance raised as ‘insolvency resolution process costs’ (‘IRPC’). Payment of IRPC gets highest priority in a resolution plan or in liquidation.
The IBC requires that, in a resolution plan, IRPC must be paid out prior to any recoveries being made by any creditor. Such payment includes interim finance (interest and principal) which also gets this priority. Similarly, in liquidation also, the distribution waterfall set out in the IBC provides for highest priority to IRPC (which must be paid out of the liquidation estate).
Interim finance is an important ingredient to resolve and restructure a stressed and potentially insolvent company and, in some cases, can be critical for the company’s business operations to survive during the corporate insolvency resolution process. A number of companies undergoing the IBC process have sought to raise formal interim finance. There has also been sufficient interest in this space from various financial institutions. We expect that with this first deal underway, many others will be encouraged to follow suit.
We at FinLender assist in raising financial debt raised by resolution professional during the CIRP to retain the going concern nature of the entity until the plan is approved by the CoC and subsequently by NCLT.