Part II of Insolvency Code, 2016 deals with insolvency resolution and liquidation for corporate persons. The actual work will be mostly handled by ‘resolution professional’ who will be registered ‘insolvency professional’ under the supervision of Adjudicating Authority (NCLT).
At first instance, corporate insolvency processes will be initiated. In majority of the cases, this will be initiated by secured creditors or corporate person itself.
In some cases, the process will be initiated by other creditors.
Insolvency professional will form a committee of creditors and with their concurrence, efforts will be made to evolve and finalize plan to revive the corporate person.
Plan for rehabilitation of corporate debtor will be prepared by resolution applicant and will be submitted to Insolvency Professional for approval by Committee of Creditors.
Application of this part
It is only applicable on the following:
- Financial Creditor
- Operational creditor
- Corporate debtor itself
Who is a financial CREDITOR?
To whom a financial debt is owed by a borrower.
What is a financial debt?
Financial debt is what have a time value for money and is segregated into Financial products and financial services.
Financial products are–
- Contracts of insurance
- Retirement benefit plans
- Small savings
- Foreign currency contracts
Financial services are–
- Accepting deposits
- Administering assets consisting of financial products of another person
- Effecting contracts of insurance
- Offering, managing assets
- Render advice on buying, selling or subscribing to a financial product
- Availing a financial service
- Exercising any right associated with a financial product
- Investment scheme
- Maintain, transfer records of ownership of a financial product
- Underwriting subscriptions
- Selling stored value or payment instruments
- Lease, hire purchase
- Derivatives- future transactions
- Indemnity, bonds
Who is an Operational creditor?
To whom an operational debt is owed.
What is operational debt?
- Goods or services
- Repayment of dues
Who is a corporate debtor?
- Corporate debtor who owes a debt to any person
- Member or partner of corporate debtor
- Individual; incharge of managing operations & resources of corporate debtor
- A person who has control and suspension over the financial affairs of corporate debtor.
Insolvency laws have come into force with the purpose of time bound resolution and revival of sick companies and to promote entrepreneurship. This article discusses about the main components of this Code which forms the base of this very legislation.
Disclaimer – The above summary is based on the personal interpretation of the revised regulations, which may differ person to person. Hence, the readers are expected to take expert opinion before placing reliance on this article.