Insolvency is a situation where a legal person (including companies) is not able to pay to debts to its creditors, when they become due & payable. Corporate insolvency may involve several parties such as creditors, shareholders, directors & managers of the company, employees & customers etc. Financial & management consultants, advocates, bankers etc. also play their role in providing professional advisory services. Insolvency & Bankruptcy Code is a law that empowers the creditors to recover their money from debtors. Corporate Insolvency Resolution Process is a recovery mechanism for creditors. If a company becomes insolvent, a financial creditor, an operational creditor, or the corporate entity itself may initiate Corporate Insolvency Resolution Process (CIRP). Fast-track Corporate Insolvency Resolution Process was introduced to improve the ease of doing business & to eliminate the excessive delay caused due to the insolvency process of a small-scale company. Under Insolvency & Bankruptcy Code, 2016, the maximum number of days required to complete the resolution process is 270 days. This has affected the small-scale companies which do not requires such a number of days for winding up. The time limits prescribed were not appropriate from the point of view of small-scale enterprises since these cases were complex in nature. The procedure relating to the fast-track insolvency of small-scale enterprises is provided under Sections 55 to 58 of the Insolvency & Bankruptcy Code, 2016. Procedure followed during Fast-track Corporate Insolvency Resolution Process
An Interim resolution Professional is appointed by the National Company Law Tribunal (Adjudicating Authority) after an application is filed for the initiation of Corporate Insolvency Resolution Process.
The Interim Resolution Professional makes an announcement to the public within three days of his nomination as an Interim Resolution Professional. It shall provide the last date for submission of claims by the applicant which should not be more than 10 days from his appointment. The announcement should be made in English & one regional language.
The interim resolution professional is provided a time-frame of 10 days for the submission of claims. Claims by operational creditors, financial creditors, employees etc. are to be submitted to the resolution professional along with additional documents in support of the claim such as records available with the information utility & other relevant documents including the contract for the supply of goods, contract of employment etc. The resolution professional makes the verification of all the claims submitted before him within seven days of submission of the last claim.
The resolution professional forms a committee of creditors consisting of financial or operational creditors of the corporate debtor. The meeting is to be conducted by the resolution professional within 7 days of filing of the report relating to the formation of the committee.
Chapter II (Part II) of the Insolvency & Bankruptcy Code, 2016 deals with fast-track corporate insolvency process. The time-period for the completion of fast-track insolvency as provided under the Code is 90 days, which can be extended upto 45 days.
Under Section 35-A, the resolution professional invites the resolution plan to be submitted by all the resolution applicants at least 15 days before its submission to the Adjudicating Authority. Fast-track Corporate Insolvency Resolution Process is a procedure intended to focus on corporate debtors against whom insolvency & bankruptcy procedures can be started by the lenders or corporate borrower himself. Time-limits are provided under the Code for speedy disposal of cases which will give more opportunity to the adjudicating authority to focus on complex issues which requires a lot of time, money & attention.
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