Statistics suggest that India has a moderate ranking when it comes to handling insolvencies. Before the emergence of Insolvency and Bankruptcy Code, the dissolution of companies took about four to five years although the numbers have dropped radically during the past one year. Due to the introduction of the bankruptcy laws, conducting business is easy in this country but businessmen now have more trust in the investors and lenders. The IBC has brought about this massive change as far as the resolution process of the NPA’s are concerned and everything takes place within the specified schedules. Therefore, the redistribution of assets and businesses also happens quickly when compared with the lengthy court schedules and the red flags associated with them.
After the introduction of IBC, a lot of avenues have opened for the law firms and your very own bankruptcy law lawyer shows you the proof. Besides becoming a professional licensed by the Insolvency and the Bankruptcy Board of India, every law practitioner in this field must have basic knowledge of the IBC process. The role of the attorney is not restricted to the process of litigation alone, but stretches to the advisory services and drafting the essential documents through each step of the process of insolvency.
Table of Contents
Work of the litigation professional
According to the bankruptcy and the insolvency act, the work of a lawyer includes filing of application before National Company Law Tribunal or NCLT only when.
- The resolution applicant does not provide the bank guarantee.
- The Directors of the corporate firm under debt and the promoter are not willing to provide the required information or the document.
- Violation of moratorium by a stakeholder or creditor.
The legal professional must also ensure that all the filings before NCLT is carried out in the prescribed form along with proper documents.
Work for the company
During the execution of the insolvency law in India, there is no legal firm working on behalf of the company as the work involves providing advice to the resolution professional, the creditors, and the promoters. However, the promoters can talk to the lawyers or the firm working for the company for advice regarding special issues as they already have a pre-conceived relationship with the lawyers due to the liaison between the firm and the lawyers.
Dealing with the creditors and the suppliers
When the operational creditors begin the initiation of the application under Section 9 of the IBC, a demand notice of ten days is to be served to the corporate debtor allowing them to pay the dues within the same period, if they fail, the CURP is to before NCLT only when the amount of debt exceeds one lakh. When the corporate debtor cannot pay the amount within the designated time and does not reply or demonstrate the existence of a pre-existing dispute, the operational creditors must file an application for the initiation of IBC process before NCLT.
As a lawyer, you have to make sure at this phase that the demand notice has been served and all the requirements under insolvency and bankruptcy law have been properly met. Every lawyer must familiarize themselves with this process and the issue of the demand notice. Prior to filing an application before NCLT, it must be properly organized with the annexures and the necessary court fees are to be provided under IBC.
Handling the lenders
The lender or the financial creditor can file the application needed for the commencement of CIRP under Section 7 of IBC when the corporate debtor fails to make the payment to the financial creditor whether it is the entire amount or a part of the debt they owe when the debt amount exceeds rupees one lakh INR. Typically, the lenders include the financial institutions and the banks that offer loans to the corporate entities.
Role of the promoters
The promoters fail to have control over the company once NCLT admits the application of insolvency. According to the amendment in the bankruptcy law in India, it facilitates the corporate debtor to withdraw the case before the CIRP begins. For the attorney of the promoter, there is a significant role of filing the petitions under the specified sections of NCLT. A lot of variations exist for withdrawing the case after the issuance of the notice, but the lawyer must look into these issues and set things right according to the law.
Furthermore, the lawyer has to make sure that the interest of the stakeholders is properly protected. If the lawyer decides to take the assistance of third party or when a foreign firm expresses interest to invest in the company, the legal firm must offer advice and assist the promoter right from the time of proposal to the investment by the third party.
The CoC is responsible for handling the majority of CIRP work and requires the lawyer’s advice at every stage. The Resolution Plan submitted by the Resolution Applicant must get the approval of CoC prior to presenting the case before the NCLT. When the process of insolvency of the corporate debtor is taken up by voting, the lawyer needs to vet the plan beforehand to ensure that it complies with the rues of IBC. When the Resolution Professional or the RP fails to abide by the law, the CoC makes it necessary for the lawyer to file another application to change the RP. The role of a legal counsel is vital as it serves as the liaison between the RP and CoC. All the necessary communication must be vetted by the lawyer. The legal professional also reviews the report of liquidation and analyzes it as per the regulations of IBC.