Corporate Insolvency Resolution Process (CIRP) under the Insolvency and Bankruptcy Code (IBC), 2016

 Corporate Insolvency Resolution Process (CIRP) under the Insolvency and Bankruptcy Code (IBC), 2016

To initiate Corporate Insolvency Resolution Process (CIRP) under the Insolvency and Bankruptcy Code (IBC), 2016, certain prerequisites must be met.

These include:

1.      The existence of a default by the corporate debtor,

2.      A debt exceeding the minimum threshold limit, and

3.      A demand notice served by the creditor.

The creditor must also provide evidence of the default and the debt, along with proof of service of the demand notice.

Once these conditions are satisfied, the creditor can file an application for CIRP with the National Company Law Tribunal (NCLT), which will then admit or reject the application based on its merits.

It's important to note that CIRP is a legal process that involves various stakeholders and timelines, and seeking professional advice is recommended.

 

CIRP Regulation Process:

The Insolvency and Bankruptcy Code (IBC) introduced in 2016 has brought about significant changes in how insolvency and bankruptcy proceedings are conducted in India. One of the key features of the IBC is the Corporate Insolvency Resolution Process (CIRP), which is a mechanism for resolving the insolvency of corporate entities.

In this article, I will take a closer look at the CIRP regulations under IBC.

The CIRP is initiated when a company defaults on its debt obligations and is unable to pay its creditors. The process begins with the filing of an application by a creditor or the company itself, which is then admitted by the National Company Law Tribunal (NCLT). Once the application is admitted, a moratorium is imposed on the company, which prevents any legal action against it by its creditors.

The CIRP regulations under IBC provide for a timeline of 180 days for the resolution of the company's insolvency. This can be extended up to a maximum of 270 days, subject to the approval of the NCLT, During this period, a resolution professional (RP) is appointed to manage the affairs of the company and come up with a resolution plan.

The RP is responsible for investigating the company's affairs and identifying potential buyers or investors who can take over the company. The RP then invites resolution plans from these buyers or investors, which are evaluated by a committee of creditors (CoC). The CoC consists of all the financial creditors of the company and is responsible for approving or rejecting the resolution plan.

If a resolution plan is approved by the CoC, it is then submitted to the NCLT for final approval. If the NCLT approves the plan, it becomes binding on all stakeholders, including the company, its creditors, and its employees. If the plan is not approved, the company goes into liquidation.

The CIRP regulations under IBC have been instrumental in resolving the insolvency of several companies in India. The process is designed to be time-bound and transparent, which has helped to instill confidence in investors and creditors; however, there have been some challenges in implementing the CIRP regulations, including delays in the resolution process and disputes among stakeholders.

In conclusion, the CIRP regulations under IBC provide a framework for resolving the insolvency of corporate entities in India. The process is designed to be time-bound and transparent and involves the appointment of a resolution professional, the formation of a committee of creditors, and the submission of a resolution plan to the NCLT for approval, while there have been some challenges in implementing the CIRP regulations, they have been instrumental in resolving the insolvency of several companies in India.

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