Status as on 1/08/2019
With the rise in the bar of competition in the commercial sector, there is an equivalent drop in the revenue generated out of the same. The mad rush for profits has led to an incessant race for opening new business in every particular field, even knowing that the same was never in your forte. This particular reason has led to the downfall of the business and consequently in the downfall of the economy! It is easy to open up a new business, however, it is difficult to manage the same when your losses are more than your revenues.
This is when Section 10 of the Insolvency and Bankruptcy Code, 2016 [hereinafter referred to as the Code] comes to your rescue. That as per the Section 10 of the Code, a Corporate person/Company/Corporate Debtor [Means a person who owes a debt to any person] can move an application under Section 10, before the Hon’ble National Company Law Tribunal for declaring itself as INSOLVENT. The process to get itself insolvent through the process of law is much easier, than to sell off your assets because one cannot self assess the number of Creditors in the company, which may become a matter of dispute.
That for the purposes of the above discussion, the entire process of Corporate Insolvency of a Corporate Person under Section 10 of the Code, is being explained herein below:
WHEN CAN CORPORATE INSOLVENCY BE INITIATED?
Insolvency against self i.e., a Company can be initiated when the liabilities of a Corporate Debtor have increased more than its assets or in other words, the Corporate Debtor has committed a “DEFAULT”. A default means non-payment of the obligation or liability when whole or any part of the same has become due and payable, but the same has not been paid.
WHO CAN FILE FOR CORPORATE INSOLVENCY?
- The Corporate Debtor himself can file for Corporate insolvency.
- A member or partner of the Corporate Debtor authorized to make an application in this regard.
- An individual who is in charge of managing the operations and resources of the Corporate Debtor.
- A person who has control and supervision over the financial affairs of the Corporate Debtor.
WHAT ARE THE DOCUMENTS REQUIRED FOR FILING OF THE APPLICATION?
The documents required can be briefly classified into two heads:
- CONSTITUTIONAL DOCUMENTS:
- Articles of Association
- Memorandum of Association
- Incorporation documents of a Limited Liability Partnership
- OTHER DOCUMENTS:
- Information relating books of accounts
- Information relating the Resolution Professional proposed to be appointed as Interim Resolution Professional
- Special Resolution passed by the Shareholders of a Corporate Debtor or the resolution passed by at least three fourth of the total number of partners.
These particular documents have been substituted by the Insolvency & Bankruptcy Code (Second Amendment) Act, 2018, keeping in view the misuse of the provision of corporate insolvency by unscrupulous management.
WHAT IS THE FORMAT AND FEES FOR THE APPLICATION?
The application for Corporate Insolvency has to be filed under Form 6 which has been prescribed by the Insolvency & Bankruptcy Code, 2016 along with a fee of Rs.25,000/- [Rupees twenty-five thousand only].
WHEN WILL THE APPLICATION BE ADMITTED OR REJECTED?
- The application for corporate insolvency will be admitted if the Hon’ble National Company Law tribunal finds the application complete in all manner with all the documents and further there is no disciplinary proceeding is pending against the proposed Resolution Professional. The usual time period, in this case, is 14 days.
- That application for corporate insolvency will be rejected if the Hon’ble National Company Law Tribunal finds the application to be incomplete in any respect or in case any disciplinary action is pending against the proposed Resolution Professional.
WHEN WILL THE PROCESS OF CORPORATE INSOLVENCY COMMENCE?
The process will commence with the admission of the application, which will be looked after by the proposed Interim Resolution Professional.
WHO ALL ARE NOT ENTITLED TO MAKE AN APPLICATION FOR CORPORATE INSOLVENCY?
- Corporate Debtor already undergoing a corporate insolvency resolution process.
- Corporate Debtor having completed the corporate insolvency resolution process twelve months preceding the date of filing the application.
- Corporate Debtor has violated any terms of the resolution plan which was approved twelve months before the filing of an application.
Corporate Debtor against whom the liquidation process has already been initiated.
Disclaimer – The above articles are based on the interpretation of related situations and laws that may change person to person. The readers are expected to take expert opinion before placing reliance on this article. For any clarification, please reach the author at firstname.lastname@example.org