PRESENTATION ON INSOLVENCY AND BANKRUPTCY CODE 2016 – RECENT CHANGES

2. PRESENTATION ON INSOLVENCY AND BANKRUPTCYCODE 2016 – RECENT CHANGES METTUR-SALEM CHAPTER 10TH FEBRUARY 2018 5.30 p.m. to 8.30 p.m. CS N SANTHANAM

3. INSOLVENCY AND BANKRUPTCYCODE 2016 – RECENT CHANGES • DEFINITION • CURRENT SCENARIO • NEED FOR A NEW CODE • REGULATORY MECHANISM • BANKRUPTCY BOARD OF INDIA • INSOLVENCY PROFESSIONALS AND AGENCIES • INSOLVENCY PROCESS • LIQUIDATION PROCESS

4. Definition of Insolvency • Insolvency is a situation where an entitycannot raise enough cash to meet its obligations or to pay debts as they become due to payment.

5. Definition of Bankruptcy • Bankruptcy is when a person voluntarily declares him as an insolvent and goes to the Court. • On declaring the person as “Bankrupt”, the court is responsible to liquidate the personal property of the insolvent and distribute it among the creditors of the insolvent.

6. IB CODE 2016 – CURRENT SCENARIO • INSOLVENCY AND BANKRUPTCY PROCESS DONE THROUGH JURISDICTIONAL COURTS • CIVIL COURTS, HIGH COURTS, SUPREME COURT • LACK OF TIMELY FINANCIAL INFORMATION OF DEBTORS • TIME DELAY • PROLONGED PROCESS • COURTS ARE ALREADY LOADED WITH MULTIPLE CASES • NEED FOR A SPECIAL AUTHORITY TO DEAL WITH.

7. APPLICABLE LAWS • For individual cases: • Presidency Towns Insolvency Act 1909 • Provincial Insolvency Act 1920

8. APPLICABLE LAWS • For Corporates: • Sick Industrial Companies (Special Provisions) Act 1985 • Recovery of Debt Due to Banks and Financial Institutions Act, 1993 • Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act 2002 (SARFAESI) • BIFR and Debt Recovery Tribunals

9. CURRENT SCENARIO

10. TIME TAKEN FOR SETTLEMENT OF CASES AROUND THE GLOBE

11. OBJECTIVES OF NEW CODE • TO CREATE A NEW INSTITUTIONAL FRAMEWORK CONSISTING OF: • INSOLVENCY AND BANKRUPTCY BOARD • INSOLVENCY PROFESSIONAL AGENCIES • INSOLVENCY PROFESSIONALS • INFORMATION UTILITIES AND • ADJUDICATING AUTHORITIES. • TO OFFER A UNIFORM AND COMPREHENSIVE LEGISLATION.

12. OBJECTIVES OF NEW CODE • TO FACILITATE TIME BOUND INSOLVENCY RESOLUTION PROCESS AND LIQUIDATION • TO IMPROVE EASE OF DOING BUSINESS IN INDIA AND ALSO TO SET UP A BETTER AND FASTER DEBT RECOVERY MECHANISM IN INDIA.

13. COVERAGE • INDIVIDUALS • PARTNERSHIP FIRMS • THEY ARE GOVERNED BY THE DEBT RECOVERY TRIBUNAL (DRT) • CORPORATES (INCLUDING DISPUTE OF CORPORATE DEBTORS AND PERSONAL GUARANTORS) • LIMITED LIABILITY PARTNERSHIPS - GOVERNED BY N.C.L.T.

14. NOT COVERED • THE INSOLVENCY AND BANKRUPTCY CODE 2016 IS NOT APPLICABLE TO : • NBFCs • INVESTMENT COMPANIES

15. “CREDITOR” definition made wide • Under the Provincial Insolvency Act 1920, creditor includes a judgment debtor. • Under the new code, “creditor” means any person to whom a debt is owed and includes: • A financial creditor • An operational creditor • A secured creditor • An un secured creditor and • A Decree Holder

16. REGULATORY MECHANISM • INSOLVENCY AND BANKRUPTCY BOARD OF INDIA (IBB) : A BODY CORPORATE. • A 10 member board appointed by the CG. • Chairperson • Three members from MOF, MCA, MOL (ex-officio) • One RBI nominee • Five other members out of which three are whole-time members.

17. Role of BBI • Regulating all matters relating to I & B process • Setting out eligibility requirements of Insolvency Intermediaries (II) • Regulating entry, registration and exit of II • Making model bye-laws for IPAs • Setting out regulatory standards for insolvency professionals • Specifying manners in which Information Utilities can collect and store data.

18. INSOLOVENCY PROFESSIONAL AGENCIES • To register with BBI and obtain Certificate. • Roles: Promotion of- • Professional development and regulation of IPs • Good professional and ethical conduct among IPs • Protect interests of debtors, creditors etc • Services of competent IPs to cater to needs of debtors, creditors etc • Growth of IPA for effective resolution of I & B processes under this code.

19. INSOLVENCY PROFESSIONALS (IPs) • Plays a key role in the efficient working of Insolvency and Bankruptcy Process. • Insolvency professionals will be enrolled as a member of the Insolvency Professional Agency and registered with the Insolvency and Bankruptcy Board. • Board may specify categories of professionals or persons possessing such qualifications and experience in the field of finance, law, management, insolvency or such other field as it deems fit.

20. INFORMATION UTILITY • To register with BBI and obtain certificate of registration to carry on its business as Information Utility under the code. • Information Utility removes the information dependency on the debtors for critical information required for resolving insolvency. • Information available to creditors, resolution professionals, liquidators and other stakeholders in insolvency and bankruptcy proceedings.

21. ADJUDICATING AUTHORITIES • NATIONAL COMPANY LAW TRIBUNAL • NATIONAL COMPANY LAW APPELLATE TRIBUNAL • DEBT RECOVERY TRIBUNAL • DEBT RECOVERY APPELLATE TRIBUNAL

22. WHO CAN APPLY ? • Financial Creditors : creditors to whom corporate debtor owes financial debt • Operational creditors : creditors to whom corporate debtor owes operational debts such as claims for goods and services, employees etc • Corporate Applicant : corporate debtor or his shareholders, partner, management personnel or employees.

23. INSOLVENCY RESOLUTION PROCESS • DECLARATION OF MORATORIUM • CAUSE A PUBLIC ANNOUNCEMENT • APPOINTMENT OF AN INTERIM RESOLUTION PROFESSIONAL • COMMITTEE OF CREDITORS • RESOLUTION PLAN • TIME LIMIT

24. FAST TRACK CORPORATE INSOLVENCY RESOLUTION PROCESS • (a) corporate debtor with assets and income below a level as may be notified by Central Government. • (b) corporate with such class of creditors or such amount of debt as may be notified by CG. • (c) such other category of corporate persons as may be notified by CG. • 90 DAYS + 45 DAYS EXTENSION = 135 DAYS

25. LIQUIDATION PROCESS • Liquidation process starts when the insolvency process completes. • Liquidation process involves identification of assets and liabilities and distribution mechanism among creditors

26. TIME FRAME • 240 DAYS FROM THE DATE OF FILING OF APPLICATION FOR INSOLVENCY.

27. STATUS OF CASES FILED UNDER IBBI • AS ON DEC 2017, 470 CASES ADMITTED BY NCLT. • AS PER RBI’s DIRECTIVE IN JUNE 2017, LENDERS HAVE SOUGHT TO RESOLVE 12 BIG CORPORATE DEFAULTERS • AS PER RBI DATA, 4300 APPLICATIONS UNDER CORPORATE INSOLVENCY RESOLUTION PROCESS WERE FILED BEFORE VARIOUS BENCHES OF NCLT. • RESOLUTION WOULD ESSENTIALLY MEAN FINDING BUYERS TO EXTRACT BEST OUT OF THE ASSETS. • AN AMOUNT OF RS 3,73,379 CRORE AS ON 30.9.2017 AS PER RBI ACCOUNT FOR THE TOTAL OUTSTANDING FROM TOP 50 STRESSED BORROWERS. • CONCERN OVER PRICING OF ASSETS BY POTENTIAL BUYERS AND THE NUMBER OF BIDDERS

28. STATUS OF CASES FILED UNDER IBBI • UNCERTAINTY ON PRICING • UNKNOWN LIABILITIES: SERVICE TAX DUES, LABOUR DUES, OPERATIONAL CREDITORS, ELECTRICITY ETC. • POSSIBLE BUYERS IN FRAY: LONDON BASED ARCELOR MITTAL, BROOKFIELDS, POSCO, BLACKSTONE, TATA GROUP, KOTAK GROUP,SHAPOORJI PALLANJI, PIRAMAL GROUP AND SAJJAN JINDAL’S JSW GROUP FOR BUYING THE STRESSED ASSETS BEFORE NCLT

29. CONCLUSION • PROCESS HAS STARTED • TEETHING TROUBLES EXIST • MEANS TO SORT OUT THESE LOOSE ENDS • INDIA WILL DEFINITELY ACHIEVE THE DEADLINE IF NOT IN FULL • WELCOME CODE

30. THANK YOU