1. Insolvency and Bankruptcy Code 2016 Dr. Rajkumar S. Adukia (B. Com (Hons.), FCA, ACS, ACMA, LL.B, MBA, Dip IFRS (UK), DLL&LW, DIPR, Dip in Criminology.) Ph.D 9820061049 rajkumarradukia@caaa.in Dr. Rajkumar S. Adukia (B. Com (Hons.), FCA, ACS, ACMA, LL.B, MBA, Dip IFRS (UK), DLL&LW, DIPR, Dip in Criminology.) Ph.D 9820061049 rajkumarradukia@caaa.in 1

2. Government Committees on Bankruptcy Year Committee Outcome 1964 24th Law Commission Amendments to the Provincial Insolvency Act, 1920. 1981 Tiwari Committee SICA, 1985. 1991 Narasimham Committee I (RBI) RDDBFI Act, 1993. 1998 Narasimham Committee II (RBI) SARFAESI Act, 2002. 1999 Justice Eradi Committee (GOI) Companies (Amendment) Act, 2002, Proposed repeal of SICA. 2001 L.N. Mitra Committee (RBI) Proposed a comprehensive bankruptcy code. 2005 Irani Committee (RBI) Enforcement of Securities Interest and Recovery of Debts Bill, 2011. (With amendments to RDDBFI and SARFAESI). 2008 Raghuram Rajan Committee Proposed improvements to credit (Planning Commission) infrastructure. 2013Financial Sector Legislative Re- forms Draft Indian Financial Code which includes Commission (Ministry of Finance) a „Resolution Corporation‟ for resolving distressed financial firms 2014 Bankruptcy Law Reform Committee Insolvency and Bankruptcy Code, 2016 Year Committee Outcome 1964 24th Law Commission Amendments to the Provincial Insolvency Act, 1920. 1981 Tiwari Committee SICA, 1985. 1991 Narasimham Committee I (RBI) RDDBFI Act, 1993. 1998 Narasimham Committee II (RBI) SARFAESI Act, 2002. 1999 Justice Eradi Committee (GOI) Companies (Amendment) Act, 2002, Proposed repeal of SICA. 2001 L.N. Mitra Committee (RBI) Proposed a comprehensive bankruptcy code. 2005 Irani Committee (RBI) Enforcement of Securities Interest and Recovery of Debts Bill, 2011. (With amendments to RDDBFI and SARFAESI). 2008 Raghuram Rajan Committee Proposed improvements to credit (Planning Commission) infrastructure. 2013Financial Sector Legislative Re- forms Draft Indian Financial Code which includes Commission (Ministry of Finance) a „Resolution Corporation‟ for resolving distressed financial firms 2014 Bankruptcy Law Reform Committee Insolvency and Bankruptcy Code, 2016 2rajkumarradukia@caaa.in

3. Birth of The Insolvency and Bankruptcy Code In his Union Budget speech of 2014-15, the finance minister Mr. Arun Jaitley had announced the development of an effective bankruptcy code for easy exit. Bankruptcy Law Reform Committee was set up on August 22, 2014 under Sri T. K Viswanathan. Gave report in November, 2015. In Budget Speech of 2015-16 FM said: Bankruptcy law reform, that brings about legal certainty and speed, has been identified as a key priority for improving the ease of doing business. SICA and BIFR have failed in achieving these objectives. We will bring a comprehensive Bankruptcy Code in fiscal 2015-16, that will meet global standards and provide necessary judicial capacity The Insolvency and Bankruptcy Code, 2015 was introduced in Lok Sabha on 21 December, 2015. Code was referred to a Joint Parliamentary Committee (JPC) of both the Houses for scrutiny. Report was presented on April 28, 2016. On May 05, 2016, Lok Sabha passed the Insolvency and Bankruptcy Code, 2016. The Rajya Sabha approved it on May 11, 2016. President’s assent received on May 28, 2016. In his Union Budget speech of 2014-15, the finance minister Mr. Arun Jaitley had announced the development of an effective bankruptcy code for easy exit. Bankruptcy Law Reform Committee was set up on August 22, 2014 under Sri T. K Viswanathan. Gave report in November, 2015. In Budget Speech of 2015-16 FM said: Bankruptcy law reform, that brings about legal certainty and speed, has been identified as a key priority for improving the ease of doing business. SICA and BIFR have failed in achieving these objectives. We will bring a comprehensive Bankruptcy Code in fiscal 2015-16, that will meet global standards and provide necessary judicial capacity The Insolvency and Bankruptcy Code, 2015 was introduced in Lok Sabha on 21 December, 2015. Code was referred to a Joint Parliamentary Committee (JPC) of both the Houses for scrutiny. Report was presented on April 28, 2016. On May 05, 2016, Lok Sabha passed the Insolvency and Bankruptcy Code, 2016. The Rajya Sabha approved it on May 11, 2016. President’s assent received on May 28, 2016. 3rajkumarradukia@caaa.in

4. Preamble of The Code An Act to consolidate and amend the laws relating to reorganisation and insolvency resolution of corporate persons, partnership firms and individuals in a time bound manner for maximisation of value of assets of such persons, to promote entrepreneurship, availability of credit and balance the interests of all the stakeholders including alteration in the order of priority of payment of Government dues and to establish an Insolvency and Bankruptcy Board of India, and for matters connected therewith or incidental thereto. 4rajkumarradukia@caaa.in

5. Code Applies to.. (a) any company incorporated under the Companies Act, 2013 or under any previous company law; (b) any other company governed by any special Act; (c) any Limited Liability Partnership incorporated under the Limited Liability Partnership Act, 2008; (d) such other body incorporated under any law for the time being in force, as the Central Government may specify; and (e) partnership firms and individuals (a) any company incorporated under the Companies Act, 2013 or under any previous company law; (b) any other company governed by any special Act; (c) any Limited Liability Partnership incorporated under the Limited Liability Partnership Act, 2008; (d) such other body incorporated under any law for the time being in force, as the Central Government may specify; and (e) partnership firms and individuals The Code is not applicable to financial service providers as per sub-section 7 of section 3 read with subsection 17 – For MFIs, NBFCs and financial service providers there would be a separate legislation as per announcement of Mr Jayant Sinha. Part III of the Code, pertaining to insolvency of individual and firms does not apply to state of Jammu & Kashmir 5rajkumarradukia@caaa.in

6. Acts Modified & Repealed Chapter XIX & XX of Companies Act, 2013 Companies Act, 1956 Recovery of Debts due to Banks and Financial Institutions Act (RDDBFI), 1993 Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI) Sick Industrial Companies (Special Provisions) Act, 1985(SICA) The Presidency-towns Insolvency Act, 1909 The Provincial Insolvency Act, 1920 Chapter XIII of the LLP Act, 2008 Chapter XIX & XX of Companies Act, 2013 Companies Act, 1956 Recovery of Debts due to Banks and Financial Institutions Act (RDDBFI), 1993 Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI) Sick Industrial Companies (Special Provisions) Act, 1985(SICA) The Presidency-towns Insolvency Act, 1909 The Provincial Insolvency Act, 1920 Chapter XIII of the LLP Act, 2008 Acts repealed: The Presidency-towns Insolvency Act, 1909 and The Provincial Insolvency Act, 1920 Acts repealed: The Presidency-towns Insolvency Act, 1909 and The Provincial Insolvency Act, 1920 6rajkumarradukia@caaa.in

7. Insolvency Vs. Bankruptcy Insolvency is a state in which a debtor, corporate or otherwise, is unable to pay its dues to financial or operational creditors. Tests of insolvency are two fold “cash flow” test where it is unable to pay debts, and the “balance sheet” test where the liabilities, including contingent and prospective exceed the realisable assets. Bankruptcy is a legal declaration of one’s inability to pay off debts. Term used only for individuals. Company is never bankrupt, it might go for liquidation. A state of insolvency can lead to bankruptcy but the condition may also be temporary and fixable without leading to bankruptcy or liquidation. Insolvency does not necessarily lead to bankruptcy, but all bankrupt debtors are considered insolvent. Insolvency is a state in which a debtor, corporate or otherwise, is unable to pay its dues to financial or operational creditors. Tests of insolvency are two fold “cash flow” test where it is unable to pay debts, and the “balance sheet” test where the liabilities, including contingent and prospective exceed the realisable assets. Bankruptcy is a legal declaration of one’s inability to pay off debts. Term used only for individuals. Company is never bankrupt, it might go for liquidation. A state of insolvency can lead to bankruptcy but the condition may also be temporary and fixable without leading to bankruptcy or liquidation. Insolvency does not necessarily lead to bankruptcy, but all bankrupt debtors are considered insolvent. 7rajkumarradukia@caaa.in

8. Why Insolvency Code? As of 2015, insolvency resolution in India took 4.3 years on an average. This is higher when compared to other countries such as United Kingdom (1 year) and United States of America (1.5 years). These delays are caused due to time taken to resolve cases in courts, and confusion due to a lack of clarity about the current bankruptcy framework 8rajkumarradukia@caaa.in

9. Why Insolvency Code? The recovery rates obtained in India are among the lowest in the world. When default takes place, broadly speaking, lenders seem to recover 20% of the value of debt. Presently creditors know that they have weak rights resulting in a low recovery rate, they are averse to lending specially unsecured loans. Long-dated corporate bonds are essential for most infrastructure projects. The lack of lending without collateral, and the lack of lending based on the prospects of the firm, has emphasised debt financing of asset-heavy industries Some of the most important industries for India‟s rapid growth are those which are more labour intensive. These industries have been starved of credit. Delays in insolvency process causes value destruction The recovery rates obtained in India are among the lowest in the world. When default takes place, broadly speaking, lenders seem to recover 20% of the value of debt. Presently creditors know that they have weak rights resulting in a low recovery rate, they are averse to lending specially unsecured loans. Long-dated corporate bonds are essential for most infrastructure projects. The lack of lending without collateral, and the lack of lending based on the prospects of the firm, has emphasised debt financing of asset-heavy industries Some of the most important industries for India‟s rapid growth are those which are more labour intensive. These industries have been starved of credit. Delays in insolvency process causes value destruction 9rajkumarradukia@caaa.in

10. UNCITRAL Legislative Guide on Insolvency: Ideal Code Provision of certainty in the market to promote efficiency and growth. Maximisation of value of assets. Striking a balance between liquidation and reorganisation. Ensuring equitable treatment of similarly situated creditors. Provision of timely, efficient and impartial resolution of insolvency. Preservation of the insolvency estate to allow equitable distribution to creditors. Ensuring a transparent and predictable insolvency law that contains incentives for gathering and dispensing information. Recognition of existing creditor rights and establishment of clear rules for ranking priority of claims. Establishment of a framework for cross-border insolvency Provision of certainty in the market to promote efficiency and growth. Maximisation of value of assets. Striking a balance between liquidation and reorganisation. Ensuring equitable treatment of similarly situated creditors. Provision of timely, efficient and impartial resolution of insolvency. Preservation of the insolvency estate to allow equitable distribution to creditors. Ensuring a transparent and predictable insolvency law that contains incentives for gathering and dispensing information. Recognition of existing creditor rights and establishment of clear rules for ranking priority of claims. Establishment of a framework for cross-border insolvency 10rajkumarradukia@caaa.in

11. Principles underlying the Code T he Code will facilitate the assessment of viability of the enterprise at a very early stage as there is a shift form net worth based insolvency identification to Cash flow based insolvency identification The Code will enable symmetry of information between creditors and debtors by creation of information utilities The Code will ensure a time-bound process to better preserve economic value as will require insolvency resolution process to be completed within 180 days extendable to 270 days. The Code will ensure a collective process. The Code will respect the rights of all creditors equally. The Code ensures that, when the negotiations fail to establish viability, the outcome of bankruptcy is binding. The Code will ensure clarity of priority, and that the rights of all stakeholders are upheld in resolving bankruptcy. T he Code will facilitate the assessment of viability of the enterprise at a very early stage as there is a shift form net worth based insolvency identification to Cash flow based insolvency identification The Code will enable symmetry of information between creditors and debtors by creation of information utilities The Code will ensure a time-bound process to better preserve economic value as will require insolvency resolution process to be completed within 180 days extendable to 270 days. The Code will ensure a collective process. The Code will respect the rights of all creditors equally. The Code ensures that, when the negotiations fail to establish viability, the outcome of bankruptcy is binding. The Code will ensure clarity of priority, and that the rights of all stakeholders are upheld in resolving bankruptcy. 11rajkumarradukia@caaa.in

12. Structure of the Code There are 255 sections, 11 schedules, 5 parts and 21 chapters. o Part I – Preliminary – Section 1 to 3 o Part II - Insolvency resolution and liquidation for corporate bodies – Section 4 to 77 o Part III – Insolvency resolution and bankruptcy for individuals and partnership firms – section 78 to 187 o Part IV – Regulation of Insolvency Professionals, agencies and information utilities – section 188 to 223 o Part V – Miscellaneous- Section 224 to 255 11 Schedule amending 11 existing Acts There are 255 sections, 11 schedules, 5 parts and 21 chapters. o Part I – Preliminary – Section 1 to 3 o Part II - Insolvency resolution and liquidation for corporate bodies – Section 4 to 77 o Part III – Insolvency resolution and bankruptcy for individuals and partnership firms – section 78 to 187 o Part IV – Regulation of Insolvency Professionals, agencies and information utilities – section 188 to 223 o Part V – Miscellaneous- Section 224 to 255 11 Schedule amending 11 existing Acts 12rajkumarradukia@caaa.in

13. Key Highlights of Code The Code Time Bound IRP Creditor Based Calming Period Waterfall Mechanism Insolvency and Bankruptcy Board of India 13rajkumarradukia@caaa.in

14. Institutional Structure under New Code: Insolvency and Bankruptcy Board Insolvency Professional Agency Insolvency Professionals Information Utilities Registration 14rajkumarradukia@caaa.in

15. Adjudicating Authorities For Corporate National Company Law Tribunal (NCLT) National Company Law Appellate Tribunal (NCLAT) For Individuals and Firms Debt Recovery Tribunal (DRT) Debt Recovery Appellate Tribunal (DRAT) Supreme Court The National Company Law Tribunal (NCLT) and the National Company Law Appellate Tribunal (NCLAT) have been constituted by Central Government with effect from 1 June, 2016. wth eleven Benches – two at New Delhi and one each at Ahmedabad, Allahabad, Bengaluru, Chandigarh, Chennai, Guwahati, Hyderabad, Kolkata and Mumbai. The Principal Bench of the NCLT will be at New Delhi. 15rajkumarradukia@caaa.in

16. Insolvency and Bankruptcy Board of India The IBBI would consist of members including representatives from MCA, MoF, RBI It would oversee the functioning of insolvency intermediaries i.e., insolvency professionals, insolvency professional agencies and information utilities; and regulate the insolvency process. IBBI would make model bylaws which can adopted by Insolvency Agencies for regulating Insolvency Professionals. The IBBI would consist of members including representatives from MCA, MoF, RBI It would oversee the functioning of insolvency intermediaries i.e., insolvency professionals, insolvency professional agencies and information utilities; and regulate the insolvency process. IBBI would make model bylaws which can adopted by Insolvency Agencies for regulating Insolvency Professionals. 16rajkumarradukia@caaa.in

17. Insolvency Utilities(Ius) Registered Bodies to collect, collate, authenticate and disseminate financial information of debtors in centralised electronic databases. The Code requires creditors to provide financial information of debtors to multiple utilities on an ongoing basis. Such information would be available to creditors, resolution professionals, liquidators and other stakeholders in insolvency and bankruptcy proceedings. The purpose of this is to remove information asymmetry and dependency on the debtor's management for critical information that is needed to swiftly resolve insolvency. Registered Bodies to collect, collate, authenticate and disseminate financial information of debtors in centralised electronic databases. The Code requires creditors to provide financial information of debtors to multiple utilities on an ongoing basis. Such information would be available to creditors, resolution professionals, liquidators and other stakeholders in insolvency and bankruptcy proceedings. The purpose of this is to remove information asymmetry and dependency on the debtor's management for critical information that is needed to swiftly resolve insolvency. 17rajkumarradukia@caaa.in

18. Insolvency Professional Agency (IPA) IPAs are registered body to admit Insolvency Professional as members and to develop code of conduct and promote best practices in governance during insolvency proceedings IPAs are registered but private professionals having minimum standards of professional and ethical conduct. In the resolution process, the IP verifies the claims of the creditors, constitutes a creditors committee, runs the debtor's business during the moratorium period and helps the creditors in reaching a consensus for a revival plan. In liquidation, the IP acts as a liquidator and bankruptcy trustee. IPAs are registered body to admit Insolvency Professional as members and to develop code of conduct and promote best practices in governance during insolvency proceedings IPAs are registered but private professionals having minimum standards of professional and ethical conduct. In the resolution process, the IP verifies the claims of the creditors, constitutes a creditors committee, runs the debtor's business during the moratorium period and helps the creditors in reaching a consensus for a revival plan. In liquidation, the IP acts as a liquidator and bankruptcy trustee. 18rajkumarradukia@caaa.in

19. Adjudicating Authorities & Appellate Authorities National Corporate Law Tribunal (NCLT) and Debt Recovery Tribunal will act as adjudicatory authority for corporate insolvency and non corporate insolvency respectively. They will entertain or dispose any insolvency application, approve or reject resolution plans, decide in respect of claims or matters of law or facts. Appeals from NCLT orders lie to the National Company Law Appellate Tribunal and thereafter to the Supreme Court of India where as appeals from DRT orders lie to the Debt Recovery Appellate Tribunal and thereafter to the Supreme Court. 19rajkumarradukia@caaa.in

20. CORPORATE INSOLVENCY Corporate Insolvency Resolution Process Liquidation Fast Track Mechanism Voluntary Liquidation Corporate Insolvency Resolution Process Liquidation Fast Track Mechanism Voluntary Liquidation 20rajkumarradukia@caaa.in

21. Mechanism: Corporate (including LLP) Default Insolvency Resolution Process u/s 6 Financial Creditors Operational Creditors Defaulting Debtor Fast Track u/s 55 No Default Voluntary Liquidation u/s59 Liquidation 21rajkumarradukia@caaa.in

22. Process Flow of Successful IRP rajkumarradukia@caaa.in22 Default of over Rs 1,00,000 Petition with Adjudicating Authority [NCLT] Appoint interim Insolvency Professional Creditors Committee Formation Confirmation of IP Resolution Plan proposed by creditors Proposal Approved by 75% Creditors Proposal Accepted by Adjudicating Authority

23. Application Who can apply: Financial Creditors, Operational Creditors or the defaulting debtor himself. Nature of default that triggers corporate insolvency: Any financial or operational creditor can apply for insolvency on default of debt or interest payment exceeding INR 1,00,000. However, operational creditor must give 10 days notice to defaulting debtors. Whom to apply: Adjudicating Authority (AA)- NCLT Documents to be filed: Along with application furnish – – Record of the default recorded with the information utility or evidence of default. – The name of the resolution professional proposed to act as an interim resolution professional and – Incase of operational creditors proof of giving notice to debtor and affidavit that there is no dispute relating to claim and certificate from bank of creditor that amount has not been received. – any other information as may be specified by the Board Who can apply: Financial Creditors, Operational Creditors or the defaulting debtor himself. Nature of default that triggers corporate insolvency: Any financial or operational creditor can apply for insolvency on default of debt or interest payment exceeding INR 1,00,000. However, operational creditor must give 10 days notice to defaulting debtors. Whom to apply: Adjudicating Authority (AA)- NCLT Documents to be filed: Along with application furnish – – Record of the default recorded with the information utility or evidence of default. – The name of the resolution professional proposed to act as an interim resolution professional and – Incase of operational creditors proof of giving notice to debtor and affidavit that there is no dispute relating to claim and certificate from bank of creditor that amount has not been received. – any other information as may be specified by the Board 23rajkumarradukia@caaa.in

24. Persons not entitled to make application A corporate debtor undergoing a corporate insolvency resolution process A corporate debtor having completed corporate insolvency resolution process 12 months preceding the date of making of the application A corporate debtor or a financial creditor who has violated any of the terms of resolution plan A corporate debtor in respect of whom a liquidation order has been made A corporate debtor undergoing a corporate insolvency resolution process A corporate debtor having completed corporate insolvency resolution process 12 months preceding the date of making of the application A corporate debtor or a financial creditor who has violated any of the terms of resolution plan A corporate debtor in respect of whom a liquidation order has been made 24rajkumarradukia@caaa.in

25. Acceptance / Rejection of Claim AA to confirm default from IU and reject or accept application and within 14 days Claim admitted if – default has occurred and – application is complete and – there is no disciplinary proceedings pending against proposed resolution professional. Claim rejected by giving 7 days notice if – Default has not occurred or – Application is incomplete – Disciplinary proceeding is pending against proposed professional AA to confirm default from IU and reject or accept application and within 14 days Claim admitted if – default has occurred and – application is complete and – there is no disciplinary proceedings pending against proposed resolution professional. Claim rejected by giving 7 days notice if – Default has not occurred or – Application is incomplete – Disciplinary proceeding is pending against proposed professional 25rajkumarradukia@caaa.in

26. Time limits Normal Insolvency Resolution Process shall be completed within a period of 180 days from date of admission of the application. The period can be extended if resolution passed at a meeting of the committee of creditors by a vote of 75% of the voting shares. It can be extended for a period not exceeding 90 days. Such extension cannot be granted more than once In case of fast track the maximum period is 90 days extendable to further 90 days. Normal Insolvency Resolution Process shall be completed within a period of 180 days from date of admission of the application. The period can be extended if resolution passed at a meeting of the committee of creditors by a vote of 75% of the voting shares. It can be extended for a period not exceeding 90 days. Such extension cannot be granted more than once In case of fast track the maximum period is 90 days extendable to further 90 days. 26rajkumarradukia@caaa.in

27. Moratorium The NCLT orders a moratorium on the debtor's operations for the period of the IRP during which no action can be taken against the company or the assets of the company. This operates as a 'calm period' during which no judicial proceedings for recovery, enforcement of security interest, sale or transfer of assets, or termination of essential contracts can take place against the debtor. 27rajkumarradukia@caaa.in

28. Public announcement of IRP Public announcement shall contain following information – name and address of the corporate debtor under the corporate insolvency resolution process – name of the authority with which the corporate debtor is incorporated or registered – the last date for submission of claims – details of the interim resolution professional who shall be vested with the management of the corporate debtor and be responsible for receiving claims – penalties for false or misleading claims – the date on which the corporate insolvency resolution process shall close Public announcement shall contain following information – name and address of the corporate debtor under the corporate insolvency resolution process – name of the authority with which the corporate debtor is incorporated or registered – the last date for submission of claims – details of the interim resolution professional who shall be vested with the management of the corporate debtor and be responsible for receiving claims – penalties for false or misleading claims – the date on which the corporate insolvency resolution process shall close 28rajkumarradukia@caaa.in

29. Appointment and tenure of interim resolution professional (IRP) AA shall appoint an IRP within 14 days from insolvency commencement date. No disciplinary proceedings shall be pending against interim resolution professional. Board shall within 10 days of receipt of reference from AA, recommend the name of an insolvency professional to AA against whom no disciplinary proceedings are pending. Management of the affairs of the corporate debtor shall vest in IRP. IRP have power similar to BOD of company and should take steps to maintain value of assets and constitute Committee of Creditors AA shall appoint an IRP within 14 days from insolvency commencement date. No disciplinary proceedings shall be pending against interim resolution professional. Board shall within 10 days of receipt of reference from AA, recommend the name of an insolvency professional to AA against whom no disciplinary proceedings are pending. Management of the affairs of the corporate debtor shall vest in IRP. IRP have power similar to BOD of company and should take steps to maintain value of assets and constitute Committee of Creditors 29rajkumarradukia@caaa.in

30. Committee of Creditors The IP will then identify the financial creditors and constitute a creditors committee. Related party should be excluded from committee. Operational creditors above a certain threshold would be allowed to attend meetings of the committee but will not have voting power. Each decision of the creditors committee will require a 75% majority vote and will be binding on the corporate debtor and all its creditors. They either resolve to appoint the interim resolution professional as a resolution professional or to replace the interim resolution professional by another resolution professional. The creditors committee will considers proposals for the revival of the debtor and must decide whether to proceed with a revival plan or liquidation within a period of 180 days (subject to a one-time extension by 90 days). Anyone can submit a revival proposal, but it must necessarily provide for payment of operational debts to the extent of the liquidation waterfall. If the plan for revival is approved by minimum 75% of creditors, it would be implemented otherwise liquidation proceeding would be initiated. The IP will then identify the financial creditors and constitute a creditors committee. Related party should be excluded from committee. Operational creditors above a certain threshold would be allowed to attend meetings of the committee but will not have voting power. Each decision of the creditors committee will require a 75% majority vote and will be binding on the corporate debtor and all its creditors. They either resolve to appoint the interim resolution professional as a resolution professional or to replace the interim resolution professional by another resolution professional. The creditors committee will considers proposals for the revival of the debtor and must decide whether to proceed with a revival plan or liquidation within a period of 180 days (subject to a one-time extension by 90 days). Anyone can submit a revival proposal, but it must necessarily provide for payment of operational debts to the extent of the liquidation waterfall. If the plan for revival is approved by minimum 75% of creditors, it would be implemented otherwise liquidation proceeding would be initiated. 30rajkumarradukia@caaa.in

31. Actions Requiring Approval of Committee of Creditors raise any interim finance beyond limit decided by the committee create any security interest over the assets of the corporate debtor change the capital structure of the corporate debtor record any change in the ownership interest of the corporate debtor spend amount beyond limit sanctioned by creditors committee undertake any related party transaction amend any constitutional documents of the corporate debtor delegate its authority to any other person dispose of or permit the disposal of shares make any change in the management of the corporate debtor or its subsidiary transfer rights or financial debts or operational debts under material contracts otherwise than in the ordinary course of business make changes in the appointment or terms of contract of such personnel as specified by the committee of creditors make changes in the appointment or terms of contract of statutory auditors or internal auditors of the corporate debtor raise any interim finance beyond limit decided by the committee create any security interest over the assets of the corporate debtor change the capital structure of the corporate debtor record any change in the ownership interest of the corporate debtor spend amount beyond limit sanctioned by creditors committee undertake any related party transaction amend any constitutional documents of the corporate debtor delegate its authority to any other person dispose of or permit the disposal of shares make any change in the management of the corporate debtor or its subsidiary transfer rights or financial debts or operational debts under material contracts otherwise than in the ordinary course of business make changes in the appointment or terms of contract of such personnel as specified by the committee of creditors make changes in the appointment or terms of contract of statutory auditors or internal auditors of the corporate debtor 31rajkumarradukia@caaa.in

32. Fast Track Corporate Insolvency The Insolvency Code further prescribes a fast track corporate insolvency process for the entities with less complex structuring or businesses where the whole insolvency process will be required to be completed within a period of 90 days or an extended period of further 90 days at most. The Central Government will prescribe the classes of entities based on the assets and liabilities, amount of debt and other criteria, which will be subject to the fast track process. 32rajkumarradukia@caaa.in

33. Liquidation Scenario The creditor's committee resolves with 75% majority voting to liquidate the corporate debtor at any time during the IRP; The creditor's committee does not approve a resolution plan within 180 days or such extended period as approved by the NCLT; The NCLT rejects the resolution plan submitted to it by the creditor’s committee on technical grounds; or The debtor contravenes the agreed resolution plan and an affected person makes an application to the NCLT to liquidate the corporate debtor. Debtor can also opt for voluntary liquidation by a special resolution in a General Meeting. The creditor's committee resolves with 75% majority voting to liquidate the corporate debtor at any time during the IRP; The creditor's committee does not approve a resolution plan within 180 days or such extended period as approved by the NCLT; The NCLT rejects the resolution plan submitted to it by the creditor’s committee on technical grounds; or The debtor contravenes the agreed resolution plan and an affected person makes an application to the NCLT to liquidate the corporate debtor. Debtor can also opt for voluntary liquidation by a special resolution in a General Meeting. 33rajkumarradukia@caaa.in

34. Liquidation Estate the liquidator to form a liquidation estate which will include – any assets over which the corporate debtor has ownership rights, – encumbered assets, – tangible and intangible assets, – assets issued as collateral over which creditors have reliquished rights – all proceeds of liquidation as and when they are realized Following shall not be included in liquidation estate asset and shall not be used for recovery – – assets owned by a third party which are in possession of the corporate debtor – assets in security collateral held by financial services providers and are subject to netting and set-off in multi-lateral trading or clearing transactions – personal assets of any shareholder or partner of a corporate debtor as the case may be provided such assets are not held on account of avoidance transactions – assets of any Indian or foreign subsidiary of the corporate debtor – any other assets as may be specified by the Board, including assets which could be subject to set-off on account of mutual dealings between the corporate debtor and any creditor. the liquidator to form a liquidation estate which will include – any assets over which the corporate debtor has ownership rights, – encumbered assets, – tangible and intangible assets, – assets issued as collateral over which creditors have reliquished rights – all proceeds of liquidation as and when they are realized Following shall not be included in liquidation estate asset and shall not be used for recovery – – assets owned by a third party which are in possession of the corporate debtor – assets in security collateral held by financial services providers and are subject to netting and set-off in multi-lateral trading or clearing transactions – personal assets of any shareholder or partner of a corporate debtor as the case may be provided such assets are not held on account of avoidance transactions – assets of any Indian or foreign subsidiary of the corporate debtor – any other assets as may be specified by the Board, including assets which could be subject to set-off on account of mutual dealings between the corporate debtor and any creditor. 34rajkumarradukia@caaa.in

35. Powers and duties of liquidator to verify claims to take into his custody or control all the assets, property, effects and actionable to evaluate the assets and property of the corporate debtor to take measures to protect and preserve the assets to carry on the business of the corporate debtor for its beneficial liquidation sell the immovable and movable property and actionable claims of the corporate debtor in liquidation by public auction or private contract to invite and settle claims of creditors and claimants and distribute proceeds to institute or defend any suit, prosecution or other legal proceedings, civil or criminal, in the name of on behalf of the corporate debtor to investigate the financial affairs of the corporate debtor to determine undervalued or preferential transactions to verify claims to take into his custody or control all the assets, property, effects and actionable to evaluate the assets and property of the corporate debtor to take measures to protect and preserve the assets to carry on the business of the corporate debtor for its beneficial liquidation sell the immovable and movable property and actionable claims of the corporate debtor in liquidation by public auction or private contract to invite and settle claims of creditors and claimants and distribute proceeds to institute or defend any suit, prosecution or other legal proceedings, civil or criminal, in the name of on behalf of the corporate debtor to investigate the financial affairs of the corporate debtor to determine undervalued or preferential transactions 35rajkumarradukia@caaa.in

36. Order of priority for distribution of assets The order is as follows: Insolvency related costs Secured creditors and workmen dues upto 24 months Other employee’s salaries/dues up to 12 months Financial debts (unsecured creditors) Government dues (up to 2 years) Any remaining debts and dues Equity The order is as follows: Insolvency related costs Secured creditors and workmen dues upto 24 months Other employee’s salaries/dues up to 12 months Financial debts (unsecured creditors) Government dues (up to 2 years) Any remaining debts and dues Equity 36rajkumarradukia@caaa.in

37. Rights of Secured Creditor during Liquidation Process A secured creditor may choose to realise his security and receive proceeds from the sale of the secured assets in first priority. If the secured creditor enforces his claims outside the liquidation, he must contribute any excess proceeds to the liquidation trust and in case of any shortfall, the secured creditors will be below unsecured creditors to the extent of the shortfall. A secured creditor may choose to realise his security and receive proceeds from the sale of the secured assets in first priority. If the secured creditor enforces his claims outside the liquidation, he must contribute any excess proceeds to the liquidation trust and in case of any shortfall, the secured creditors will be below unsecured creditors to the extent of the shortfall. 37rajkumarradukia@caaa.in

38. Avoidance Transaction Liquidator has right to cancel or modify terms of certain transactions entered into by defaulting entity within one year of the initiation of IRP with third parties or within two years of initiation with related parties, which in his opinion are of preferential nature primarily entered into to benefit a particular class of people. 38rajkumarradukia@caaa.in

39. INSOLVENCY OF INDIVIDUALS AND FIRMS Fresh Start option Insolvency Resolution Process Bankruptcy Process Fresh Start option Insolvency Resolution Process Bankruptcy Process 39rajkumarradukia@caaa.in

40. Fresh Start This option is for defaults where amount involved are petty. Who can Apply: Defaulting Individual with: – Annual gross income not exceeding Rs. 60,000 – Aggregate value of assets not exceeding Rs. 20,000 – Defaulting loan not exceeding Rs, 35,000 – No dwelling house – No previous fresh start, insolvency, etc Whom to apply: Adjudicating Authority: DRT Process: The resolution (insolvency) professional will investigate and prepare a final list of all qualifying debts within 180 days from the date of application. On the expiry of this period, the DRT may pass an order discharging debtor from the qualifying debts and accord an opportunity to the debtor to start afresh, financially. This option is for defaults where amount involved are petty. Who can Apply: Defaulting Individual with: – Annual gross income not exceeding Rs. 60,000 – Aggregate value of assets not exceeding Rs. 20,000 – Defaulting loan not exceeding Rs, 35,000 – No dwelling house – No previous fresh start, insolvency, etc Whom to apply: Adjudicating Authority: DRT Process: The resolution (insolvency) professional will investigate and prepare a final list of all qualifying debts within 180 days from the date of application. On the expiry of this period, the DRT may pass an order discharging debtor from the qualifying debts and accord an opportunity to the debtor to start afresh, financially. 40rajkumarradukia@caaa.in

41. Insolvency Resolution Process Who Can apply: By creditor himself or through resolution professional of defaulting debtor. However in case of partnership firms, the application can be made all or majority of the partners. Application by creditors of partnership firm application can be made for insolvency proceeding against a single partner or the firm. Debtor shall not be entitled to make an application under sub-section (1) if he is— (a) an undischarged bankrupt; (b) undergoing a fresh start process; (c) undergoing an insolvency resolution process; or (d) undergoing a bankruptcy process Who Can apply: By creditor himself or through resolution professional of defaulting debtor. However in case of partnership firms, the application can be made all or majority of the partners. Application by creditors of partnership firm application can be made for insolvency proceeding against a single partner or the firm. Debtor shall not be entitled to make an application under sub-section (1) if he is— (a) an undischarged bankrupt; (b) undergoing a fresh start process; (c) undergoing an insolvency resolution process; or (d) undergoing a bankruptcy process 41rajkumarradukia@caaa.in

42. Interim Moratorium and appointment of resolution professional An interim moratorium commences on the date of application till the date of admission of application during which no legal action can be proceeded or initiated in respect to any debts. Within seven days of receipt of application, DRT will either nominate a resolution professional or in case application is filled by through a resolution professional confirm that there are no disciplinary proceedings pending against such resolution professional to the Board. Board will in next seven days either confirm or reject the appointment within next seven days. The resolution professional so appointed will examine and submit a report to the Adjudicating Authority recommending for approval or rejection of the application within 10 days of appointment. The Adjudicating Authority will then within fourteen days from the date of submission of the report, either admit or reject the application. An interim moratorium commences on the date of application till the date of admission of application during which no legal action can be proceeded or initiated in respect to any debts. Within seven days of receipt of application, DRT will either nominate a resolution professional or in case application is filled by through a resolution professional confirm that there are no disciplinary proceedings pending against such resolution professional to the Board. Board will in next seven days either confirm or reject the appointment within next seven days. The resolution professional so appointed will examine and submit a report to the Adjudicating Authority recommending for approval or rejection of the application within 10 days of appointment. The Adjudicating Authority will then within fourteen days from the date of submission of the report, either admit or reject the application. 42rajkumarradukia@caaa.in

43. The process If the application is accepted, a moratorium of 180 days will begin where no legal action on debts and assets would be permissible. In the Insolvency Resolution Process, the creditors and the debtor will engage in negotiations to arrive at an agreeable repayment plan for composition of the debts and affairs of the debtor, supervised by a resolution professional. The repayment plan will require approval of a three-fourth majority of creditors in value. The repayment plan may authorize or require the resolution professional to: (a) carry on the debtor's business or trade on his behalf or in his name; or (b) realize the assets of the debtor; or (c) administer or dispose of any funds of the debtor. The repayment plan will be implemented in supervision of the insolvency professional. If the application is accepted, a moratorium of 180 days will begin where no legal action on debts and assets would be permissible. In the Insolvency Resolution Process, the creditors and the debtor will engage in negotiations to arrive at an agreeable repayment plan for composition of the debts and affairs of the debtor, supervised by a resolution professional. The repayment plan will require approval of a three-fourth majority of creditors in value. The repayment plan may authorize or require the resolution professional to: (a) carry on the debtor's business or trade on his behalf or in his name; or (b) realize the assets of the debtor; or (c) administer or dispose of any funds of the debtor. The repayment plan will be implemented in supervision of the insolvency professional. 43rajkumarradukia@caaa.in

44. Bankruptcy Process The bankruptcy of an individual can be initiated only after the failure of the resolution process or non-implementation of repayment plan. The bankruptcy trustee is responsible for administration of the estate of the bankrupt and for distribution of the proceeds on the basis of the priority. The bankruptcy of an individual can be initiated only after the failure of the resolution process or non-implementation of repayment plan. The bankruptcy trustee is responsible for administration of the estate of the bankrupt and for distribution of the proceeds on the basis of the priority. 44rajkumarradukia@caaa.in

45. The Way Forward To ensure that the Code serves the desired objective, Central Government will have to set up the mechanism and infrastructural ecosystem in place. The following initiative will have to be made by the government before the Code can be made fully functional: – Establishment of Insolvency and Bankruptcy Board of India and appointment of members thereof. – Establishing Adjudicating Authority. – Licensing of Insolvency Agencies – Licensing of Information Utilities. – Mode Code of conduct for Insolvency Agencies and Professionals – Training of Information Professionals – Creating Awareness To ensure that the Code serves the desired objective, Central Government will have to set up the mechanism and infrastructural ecosystem in place. The following initiative will have to be made by the government before the Code can be made fully functional: – Establishment of Insolvency and Bankruptcy Board of India and appointment of members thereof. – Establishing Adjudicating Authority. – Licensing of Insolvency Agencies – Licensing of Information Utilities. – Mode Code of conduct for Insolvency Agencies and Professionals – Training of Information Professionals – Creating Awareness 45rajkumarradukia@caaa.in

46. IMMERGING PROFESSIONAL OPPORTUNITIES 46rajkumarradukia@caaa.in

47. Recent Evolving Opportunities Certification under Real Estate (Regulation and Development) Act, 2016 Appearing before Real Estate Authorities under the Act Indian Accounting Standards (Ind AS) convergence Ind AS training and research activities Arbitration Electronic Commerce Certification under Real Estate (Regulation and Development) Act, 2016 Appearing before Real Estate Authorities under the Act Indian Accounting Standards (Ind AS) convergence Ind AS training and research activities Arbitration Electronic Commerce 47rajkumarradukia@caaa.in

48. Recent Evolving Opportunities Internal Financial Control Services Management Accounting Services Strategic Financial Management Services Internal Audit and Internal Assurance Work Services Financial Planning and Wealth Management Services Valuation Services Internal Financial Control Services Management Accounting Services Strategic Financial Management Services Internal Audit and Internal Assurance Work Services Financial Planning and Wealth Management Services Valuation Services 48rajkumarradukia@caaa.in

49. Recent Evolving Opportunities Corporate Governance Competition Laws Consumer Protection Laws Intellectual Property Rights (IPR) Laws Anti –Money Laundering Laws Labour Laws Environmental Laws Insurance Laws Insolvency Laws Corporate Governance Competition Laws Consumer Protection Laws Intellectual Property Rights (IPR) Laws Anti –Money Laundering Laws Labour Laws Environmental Laws Insurance Laws Insolvency Laws 49rajkumarradukia@caaa.in

50. Recent Evolving Opportunities Export/Import Consultancy Business Process Outsourcing NRI Service STPI and SEZ Business Startup Service NGOs, Societies and Trusts Consultancy to Government Projects Pension Services Performance Measurement Export/Import Consultancy Business Process Outsourcing NRI Service STPI and SEZ Business Startup Service NGOs, Societies and Trusts Consultancy to Government Projects Pension Services Performance Measurement 50rajkumarradukia@caaa.in

51. Recent Evolving Opportunities Securitization Laws Securities Laws Laws relating to Charity Carriage Laws and Multi-modal transportation of Goods Information Technology and Cyber Laws Right to Information laws Legal Documentation under Private Equity International Tax Transfer Pricing Certification and Litigation Securitization Laws Securities Laws Laws relating to Charity Carriage Laws and Multi-modal transportation of Goods Information Technology and Cyber Laws Right to Information laws Legal Documentation under Private Equity International Tax Transfer Pricing Certification and Litigation 51rajkumarradukia@caaa.in

52. Thanks 52rajkumarradukia@caaa.in Thanks