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Insolvency & Bankruptcy code 2016

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Insolvency & Bankruptcy code 2016

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Insolvency & Bankruptcy code 2016

  1. 1. CHENNAI III Floor, ‘Creative Enclave’, 148-150, Luz Church Road, Mylapore, Chennai - 600 004. Tel: +91 - 44 - 24984821 BANGALORE Suite 920, Level 9, Raheja Towers, 26-27, M G Road, Bangalore - 560 001. Tel: +91 - 80 - 65462400 COIMBATORE #1533, Trichy Road, Coimbatore – 641018. Tel: +91 - 422 - 6552921 HYDERABAD Flat No. A-701, Brindavan Apartments, Niloufer Hospital Road, Redhills, Hyderabad - 500034. Tel: +91 - 40 - 60506009 COCHIN Suite 49, 8th Floor, Centre A, Alapatt Heritage Building, MG Road, Cochin – 682035 Tel: +91 - 484 - 6506216 EMAIL info@altacit.com WEBSITE www.altacit.com Sai Meera Insolvency & Bankruptcy Code 2016
  2. 2. CHENNAI III Floor, ‘Creative Enclave’, 148-150, Luz Church Road, Mylapore, Chennai - 600 004. Tel: +91 - 44 - 24984821 BANGALORE Suite 920, Level 9, Raheja Towers, 26-27, M G Road, Bangalore - 560 001. Tel: +91 - 80 - 65462400 COIMBATORE #1533, Trichy Road, Coimbatore – 641018. Tel: +91 - 422 - 6552921 HYDERABAD Flat No. A-701, Brindavan Apartments, Niloufer Hospital Road, Redhills, Hyderabad - 500034. Tel: +91 - 40 - 60506009 COCHIN Suite 49, 8th Floor, Centre A, Alapatt Heritage Building, MG Road, Cochin – 682035 Tel: +91 - 484 - 6506216 EMAIL info@altacit.com WEBSITE www.altacit.com Insolvency & Bankruptcy Code 2016 • “Biggest Economic Reform in India after the GST” • Insolvency -inability of debtors, individuals or corporates to repay their debts. • Bankruptcy happens when debtors, individuals or corporates are declared incapable of repaying their debt. • Bankruptcy is just a formal declaration of insolvency. Introduction: The bill was passed by Lower house of India’s parliament i.e. Lok Sabha on 5th May 2016 and received the assent of Indian president on 28th May 2016. biggest economic reform in India after the GST. consolidated all the laws related to insolvency in India by creating a single law.
  3. 3. CHENNAI III Floor, ‘Creative Enclave’, 148-150, Luz Church Road, Mylapore, Chennai - 600 004. Tel: +91 - 44 - 24984821 BANGALORE Suite 920, Level 9, Raheja Towers, 26-27, M G Road, Bangalore - 560 001. Tel: +91 - 80 - 65462400 COIMBATORE #1533, Trichy Road, Coimbatore – 641018. Tel: +91 - 422 - 6552921 HYDERABAD Flat No. A-701, Brindavan Apartments, Niloufer Hospital Road, Redhills, Hyderabad - 500034. Tel: +91 - 40 - 60506009 COCHIN Suite 49, 8th Floor, Centre A, Alapatt Heritage Building, MG Road, Cochin – 682035 Tel: +91 - 484 - 6506216 EMAIL info@altacit.com WEBSITE www.altacit.com Although it is undergoing an initial period of adjustment and cleaning up, the law lays down a robust framework and time-bound road map to deal with distressed or failed businesses, a welcome contrast from the earlier, seemingly never-ending process Background: Pending bankruptcy cases: nearly 60,000 bankruptcy cases are pending in Indian courts. It takes about 4.3 years for a company to shut down its operations in India. This Code, should reduce the time to 1 year. Significance: “India ranks 130th in Ease of doing business and 40th in global competitive index. Both ease of doing business and global competitive index ranking criteria have one parameter in common i.e. resolving insolvency”. Objective: Improve ease of doing business Consolidate all laws to bring in a single law to deal with it.
  4. 4. CHENNAI III Floor, ‘Creative Enclave’, 148-150, Luz Church Road, Mylapore, Chennai - 600 004. Tel: +91 - 44 - 24984821 BANGALORE Suite 920, Level 9, Raheja Towers, 26-27, M G Road, Bangalore - 560 001. Tel: +91 - 80 - 65462400 COIMBATORE #1533, Trichy Road, Coimbatore – 641018. Tel: +91 - 422 - 6552921 HYDERABAD Flat No. A-701, Brindavan Apartments, Niloufer Hospital Road, Redhills, Hyderabad - 500034. Tel: +91 - 40 - 60506009 COCHIN Suite 49, 8th Floor, Centre A, Alapatt Heritage Building, MG Road, Cochin – 682035 Tel: +91 - 484 - 6506216 EMAIL info@altacit.com WEBSITE www.altacit.com The Problem for which this code is a solution: NPS- Non Performing Asset NPA “any asset which hasn't performed for over a period of time or in an asset on which bank hasn’t received any principal or interest over a period of time, usually 90 days.” Agriculture/ Farm loan, NPA is defined as non-repayment of loans till 2 crop seasons for short duration crop and for long duration crops, the repayment period stands for 1 crop cycle. Estimate: • 13% of all commercial loans which totals 8-10 lakh crore in India are NPAs. • NPA ratio = Net non-performing assets / Loans given • IDBI, IOB have highest NPA ratio • SBI- highest amount of NPAs
  5. 5. CHENNAI III Floor, ‘Creative Enclave’, 148-150, Luz Church Road, Mylapore, Chennai - 600 004. Tel: +91 - 44 - 24984821 BANGALORE Suite 920, Level 9, Raheja Towers, 26-27, M G Road, Bangalore - 560 001. Tel: +91 - 80 - 65462400 COIMBATORE #1533, Trichy Road, Coimbatore – 641018. Tel: +91 - 422 - 6552921 HYDERABAD Flat No. A-701, Brindavan Apartments, Niloufer Hospital Road, Redhills, Hyderabad - 500034. Tel: +91 - 40 - 60506009 COCHIN Suite 49, 8th Floor, Centre A, Alapatt Heritage Building, MG Road, Cochin – 682035 Tel: +91 - 484 - 6506216 EMAIL info@altacit.com WEBSITE www.altacit.com Understanding the Challenges: • Banks and lending agencies: source of income is interest paid on the loans • NPA is a loan or credit that has not yielded an interest for a period of 90 days. • i.e. banks income has dipped. • NPAs suck the liquidity out of the market that means less cash flow. • Companies will react to this by stagnating credit policies i.e. some companies will not be able to take loans. • Principal used to finance loans – depositors money • Small banks run of low capital infusion and liquidity—NPA has ripple effect • More NPA- less liquidity- less cash inflow.
  6. 6. CHENNAI III Floor, ‘Creative Enclave’, 148-150, Luz Church Road, Mylapore, Chennai - 600 004. Tel: +91 - 44 - 24984821 BANGALORE Suite 920, Level 9, Raheja Towers, 26-27, M G Road, Bangalore - 560 001. Tel: +91 - 80 - 65462400 COIMBATORE #1533, Trichy Road, Coimbatore – 641018. Tel: +91 - 422 - 6552921 HYDERABAD Flat No. A-701, Brindavan Apartments, Niloufer Hospital Road, Redhills, Hyderabad - 500034. Tel: +91 - 40 - 60506009 COCHIN Suite 49, 8th Floor, Centre A, Alapatt Heritage Building, MG Road, Cochin – 682035 Tel: +91 - 484 - 6506216 EMAIL info@altacit.com WEBSITE www.altacit.com Further Complexity is the framework of the past • Various laws - Sick Industrial Companies Act, The Provincial Insolvency Act, Companies Act, and Recovery of debts due to banks and financial Institutions Act etc., • Overlapped jurisdiction - High Court, NCLT (National Company Law Tribunal), Debt Recovery Tribunal slowed down the debt recovery process.
  7. 7. CHENNAI III Floor, ‘Creative Enclave’, 148-150, Luz Church Road, Mylapore, Chennai - 600 004. Tel: +91 - 44 - 24984821 BANGALORE Suite 920, Level 9, Raheja Towers, 26-27, M G Road, Bangalore - 560 001. Tel: +91 - 80 - 65462400 COIMBATORE #1533, Trichy Road, Coimbatore – 641018. Tel: +91 - 422 - 6552921 HYDERABAD Flat No. A-701, Brindavan Apartments, Niloufer Hospital Road, Redhills, Hyderabad - 500034. Tel: +91 - 40 - 60506009 COCHIN Suite 49, 8th Floor, Centre A, Alapatt Heritage Building, MG Road, Cochin – 682035 Tel: +91 - 484 - 6506216 EMAIL info@altacit.com WEBSITE www.altacit.com Salient features of the bill • Covers companies, individuals, partnership firms, Limited Liability partnership firms. • Aims to build a new class of insolvency professionals (IPs) that would help sick companies. • Advocates the creation of information utilities (IUs) that will collate all the information about the debtors. • setting up of Insolvency and bankruptcy board that will regulate both IPs and IUs. • National Company Law Tribunal (NCLT) will act as the negotiating authority and deal will cases with insolvency, bankruptcy process and liquidation of companies . • Debt Recovery Tribunal (DRT) will act as a negotiating authority for individuals. • The insolvency proceeding will be initiated by NCLT/DRT after verifying the claims of the initiator.
  8. 8. CHENNAI III Floor, ‘Creative Enclave’, 148-150, Luz Church Road, Mylapore, Chennai - 600 004. Tel: +91 - 44 - 24984821 BANGALORE Suite 920, Level 9, Raheja Towers, 26-27, M G Road, Bangalore - 560 001. Tel: +91 - 80 - 65462400 COIMBATORE #1533, Trichy Road, Coimbatore – 641018. Tel: +91 - 422 - 6552921 HYDERABAD Flat No. A-701, Brindavan Apartments, Niloufer Hospital Road, Redhills, Hyderabad - 500034. Tel: +91 - 40 - 60506009 COCHIN Suite 49, 8th Floor, Centre A, Alapatt Heritage Building, MG Road, Cochin – 682035 Tel: +91 - 484 - 6506216 EMAIL info@altacit.com WEBSITE www.altacit.com The Process Who can initiate the insolvency proceedings ? Proceedings can be initiated upon default of more than Rs 1 lakh (based on payment default). stakeholder: debtor, employee The insolvency proceeding will be initiated by NCLT/DRT after verifying the claims of the initiator. NCLT/DRT will then appoint an Interim resolution professional (IRP) as proposed by the lender who has initiated the proceedings. IRP will then take over the reins of the company as the board of directors stand suspended. IRP can appoint professionals, accountants or legal experts to assist him in running the company. The IRP will verify the claims of all creditors, get cash flow in control, and call meeting of Committee of Creditors (CoC) on the 30th day of being appointed as the IRP.
  9. 9. CHENNAI III Floor, ‘Creative Enclave’, 148-150, Luz Church Road, Mylapore, Chennai - 600 004. Tel: +91 - 44 - 24984821 BANGALORE Suite 920, Level 9, Raheja Towers, 26-27, M G Road, Bangalore - 560 001. Tel: +91 - 80 - 65462400 COIMBATORE #1533, Trichy Road, Coimbatore – 641018. Tel: +91 - 422 - 6552921 HYDERABAD Flat No. A-701, Brindavan Apartments, Niloufer Hospital Road, Redhills, Hyderabad - 500034. Tel: +91 - 40 - 60506009 COCHIN Suite 49, 8th Floor, Centre A, Alapatt Heritage Building, MG Road, Cochin – 682035 Tel: +91 - 484 - 6506216 EMAIL info@altacit.com WEBSITE www.altacit.com The IRP will verify the claims of all creditors, get cash flow in control, and call meeting of Committee of Creditors (CoC) on the 30th day of being appointed as the IRP. On the first meeting, the CoC will decide whether to continue with the same IRP or appoint a new RP (Resolution professional) by 75% majority vote. If the company decides to retain the IRP then he/she would be addressed as RP. The RP will look into the commercial part of the proceedings, develop code of ethics, professional standards while Information utilities (IUs) will collect, verify, collate the financial information to be used in the proceedings. The RP will then assist the CoC in preparing a restructuring process that could either be liquidation of assets of the company or a revised payment plan.
  10. 10. CHENNAI III Floor, ‘Creative Enclave’, 148-150, Luz Church Road, Mylapore, Chennai - 600 004. Tel: +91 - 44 - 24984821 BANGALORE Suite 920, Level 9, Raheja Towers, 26-27, M G Road, Bangalore - 560 001. Tel: +91 - 80 - 65462400 COIMBATORE #1533, Trichy Road, Coimbatore – 641018. Tel: +91 - 422 - 6552921 HYDERABAD Flat No. A-701, Brindavan Apartments, Niloufer Hospital Road, Redhills, Hyderabad - 500034. Tel: +91 - 40 - 60506009 COCHIN Suite 49, 8th Floor, Centre A, Alapatt Heritage Building, MG Road, Cochin – 682035 Tel: +91 - 484 - 6506216 EMAIL info@altacit.com WEBSITE www.altacit.com • For companies, the restricting process has to be prepared and approved within 180 days and a one-time extension of 90 days if the case is complex and for start-ups, small companies the resolution process has to finish by 90 days and could be extended by 45 days. • However, if the resolution plan didn’t have the approval of 75% of CoC even after the extended 270 days (180 + 90 extended days) or the resolution plan is rejected by NCLT or DRT on technical grounds, then assets of corporate debtors are put in the liquidation process.
  11. 11. CHENNAI III Floor, ‘Creative Enclave’, 148-150, Luz Church Road, Mylapore, Chennai - 600 004. Tel: +91 - 44 - 24984821 BANGALORE Suite 920, Level 9, Raheja Towers, 26-27, M G Road, Bangalore - 560 001. Tel: +91 - 80 - 65462400 COIMBATORE #1533, Trichy Road, Coimbatore – 641018. Tel: +91 - 422 - 6552921 HYDERABAD Flat No. A-701, Brindavan Apartments, Niloufer Hospital Road, Redhills, Hyderabad - 500034. Tel: +91 - 40 - 60506009 COCHIN Suite 49, 8th Floor, Centre A, Alapatt Heritage Building, MG Road, Cochin – 682035 Tel: +91 - 484 - 6506216 EMAIL info@altacit.com WEBSITE www.altacit.com FRAME WORK • One-stop shop • Genuine business failures get a second chance. control shifts from shareholders/promoters to a committee of • creditors
  12. 12. CHENNAI III Floor, ‘Creative Enclave’, 148-150, Luz Church Road, Mylapore, Chennai - 600 004. Tel: +91 - 44 - 24984821 BANGALORE Suite 920, Level 9, Raheja Towers, 26-27, M G Road, Bangalore - 560 001. Tel: +91 - 80 - 65462400 COIMBATORE #1533, Trichy Road, Coimbatore – 641018. Tel: +91 - 422 - 6552921 HYDERABAD Flat No. A-701, Brindavan Apartments, Niloufer Hospital Road, Redhills, Hyderabad - 500034. Tel: +91 - 40 - 60506009 COCHIN Suite 49, 8th Floor, Centre A, Alapatt Heritage Building, MG Road, Cochin – 682035 Tel: +91 - 484 - 6506216 EMAIL info@altacit.com WEBSITE www.altacit.com CASES Tata Steel Essar Steel Binani Cement Jaypee associates
  13. 13. CHENNAI III Floor, ‘Creative Enclave’, 148-150, Luz Church Road, Mylapore, Chennai - 600 004. Tel: +91 - 44 - 24984821 BANGALORE Suite 920, Level 9, Raheja Towers, 26-27, M G Road, Bangalore - 560 001. Tel: +91 - 80 - 65462400 COIMBATORE #1533, Trichy Road, Coimbatore – 641018. Tel: +91 - 422 - 6552921 HYDERABAD Flat No. A-701, Brindavan Apartments, Niloufer Hospital Road, Redhills, Hyderabad - 500034. Tel: +91 - 40 - 60506009 COCHIN Suite 49, 8th Floor, Centre A, Alapatt Heritage Building, MG Road, Cochin – 682035 Tel: +91 - 484 - 6506216 EMAIL info@altacit.com WEBSITE www.altacit.com THANK YOU

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