Corporate Insolvency Resolution Process is the first stage under corporate insolvency , Where any corporate debtor commits a default-
- a financial creditor,
- an operational creditor or
- the corporate debtor itself may initiate corporate insolvency resolution process in respect of such corporate debtor.
If the Corporate Insolvency Resolution Process is initiated against corporate debtor (Company or LLP) following process is followed:
- Declaration of Moratorium (Temporary Legal Stay)
- Appointment of Interim resolution professional (IRP)
- Public announcement ( for Submission of Claims )
Management of affairs of Corporate debtor by Interim Resolution Professional :
The date of appointment of Interim Resolution Professional following powers exercise by Interim resolution professional :
- The Management affairs of the corporate debtor is vested with resolution professional and the powers of the board of directors or partners of the corporate Debtor gets suspended and vested and exercised by the resolution professional
- Reporting by officers and managers of the corporate debtor to the interim resolution professional and provision of access to such documents and records of the corporate debtor as may be required by the interim resolution professional
- The financial institution who is Managing the accounts of the Corporate debtor shall act on the instructions of the interim resolution professional in relation to such accounts and furnish all information relating to the corporate data available with them to interim Resolution resolution professional
- Resolution professional shall act and execute in the name and on behalf of the corporate debtor all deeds, receipts and other documents if any
- Resolution professional have the authority to access the electronic records of the Corporate Debtor from information utility having financial information of the corporate debtor
- Resolution professional have the authority to access books of accounts records and other relevant documents of the Corporate Debtor available with a government authority statutory auditors, Accountants and such other persons as may be specified and be responsible for complying with the requirements and any law for the time being in force on behalf of corporate debtor
So if the company goes into the CIRP process all the above powers are vested with the resolution professional
Resolution professional while making every endeavour to protect and preserve the value of property of the corporate Debtor and manage the operations of the corporate debtor as a Going Concern basis:
- Appoint accountants, legal, and other professional as may be necessary
- to enter into contracts on behalf of corporate debtor, and modify the transication and contracts entered before the commencement of CIRP
- To raise Interim Finance
Constitution of committee of creditors (COC) :
Committee of creditors by interim resolution professional mandatory required to be constituted after collection of all the claims received against the corporate debtor and determination of the financial position of the corporator
Committee of creditors shall compromise all the financial creditors to the corporate debtor and where the corporate debtor owes Financial Debts to two or more Financial Creditors as part of Consortium or an agreement, each such financial creditor shall be part of the committee of creditors and their voting shares and determine on the basis of financial debts owed to them
Appointment of Resolution Professional :
The first meeting of the committee of creditors shall be held within 7 days from the date of constitution of the committee of creditors and the committee of creditors may in the first meeting by majority of the not less than 66% of the voting shares of the financial creditors, either resolve to appoint the interim resolution professional as a resolution professional to replace the resolution professional by another resolution professional.
Preparation of Information Memorandum :
Information memorandum is prepared by the resolution professional to give an opportunity to any resolution applicant to submit resolution plan for Revival and reconstruction of Corporate debtor to avoid any future insolvency and liquidation situations.
Submission of Resolution plan :
Resolution Applicant will submit the resolution plan to resolution professional, Resolution applicant shall be prepared on the basis of information memorandum and submitted along with an affidavit stating that he is eligible to submit resolution plan
Approval of Resolution Plan:
Resolution Plan shall be binding on the corporate debtor and its employees, members, creditors, guarantors and other stakeholders involved in the resolution.