The Insolvency and Bankruptcy Code, 2016 (IBC) introduced a comprehensive framework for resolving corporate insolvencies in India. Within this framework, the Fast Track Corporate Insolvency Resolution Process (CIRP) was designed to expedite the resolution of smaller companies with simpler financial structures. This blog post provides a brief overview of the Fast Track CIRP under the IBC, highlighting its key features and benefits for the corporate sector.
The Fast Track CIRP is available for certain eligible corporate debtors. To qualify for this process, the debtor must meet the following criteria: a. The debtor should be classified as a small company, as defined under the Companies Act, 2013. b. The debtor's aggregate outstanding debt, including all creditors, should not exceed INR 1 crore (approximately USD 150,000) as specified by the central government. c. The debtor should not have undergone any previous CIRP or completed a Fast Track CIRP within the preceding two years.
The Fast Track CIRP is characterized by strict timelines, aiming to ensure swift resolution of insolvency cases. The process must be completed within a maximum period of 90 days from the insolvency commencement date, compared to 180 days for regular CIRP cases. This accelerated timeline streamlines the resolution process and reduces the overall economic impact on stakeholders.
The Fast Track CIRP follows a simplified procedure compared to the regular CIRP. The debtor, within 10 days of the commencement of the process, is required to submit the following: a. A list of creditors, along with their claims. b. A statement of its assets and liabilities. c. A certificate from the financial institutions maintaining its accounts, confirming that the debtor is eligible for the Fast Track CIRP.
The role of the resolution professional (RP) in the Fast Track CIRP is relatively limited. The RP's primary responsibility is to verify and confirm the debtor's eligibility for the Fast Track CIRP, maintain a public record of claims, and monitor the debtor's assets during the process. The reduced involvement of the RP ensures a more cost-effective and efficient resolution process.
During the Fast Track CIRP, the debtor, with the assistance of the RP, formulates a restructuring plan for approval by the committee of creditors (CoC). The CoC comprises financial creditors who evaluate the plan and vote on its acceptance. The plan must be approved by a 66% majority of the voting share of the CoC, ensuring a fair and transparent decision-making process.
The Fast Track CIRP offers several advantages to stakeholders involved in the insolvency resolution process. For the debtor, the swift resolution helps in preventing further deterioration of the business and preserves its value. Creditors benefit from a quicker recovery process, reducing potential losses and allowing them to reallocate their resources effectively. Additionally, the simplified procedure and limited involvement of the RP lead to cost savings for all parties involved.
The Fast Track Corporate Insolvency Resolution Process under the IBC, 2016 provides a streamlined and expedited approach for resolving insolvency cases involving small companies with simple financial structures. This time-bound process, with its simplified procedures and limited RP involvement, accelerates the resolution of debt-related issues while minimizing the economic impact on stakeholders. By providing an efficient and cost-effective framework, the Fast Track CIRP promotes a healthier corporate environment, encouraging prompt resolution and facilitating the revival of viable businesses in India.
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