IBC_Webinar-ppt_14.08.2020_FINAL.pdf
- 1. “IBC- Current Developments and Road Ahead from Ease of Doing Business to Economic Growth Presented By: Mr. Pavan Kumar Vijay Past President- ICSI Founder- Corporate Professionals
- 2. 7 8 9 1 12 Timeline 2014 2015 2016 2016 August 2014 Bankruptcy Law Recovery Committee was formed. 05 May 2016 - Passed by Lok Sabha 11 May 2016- Passed by Rajya Sabha 28 May 2016- Received President’s accent 01 Dec 2016 - IBC came in to effect. Nov 2015 - Draft bill submitted by BLRC Dec 2015 - IBC Bill was introduced in Lok Sabha
- 3. 1 2 3 4 5 5 Major changes in IBC Eligibility of resolution applicant for submitting resolution plans (barring defaulting promoters to bid for the company)– Section 29A Voting threshold for decision making by the committee of creditors (from 75% to 66%)- Section 21, 22, 27, 28 Categorization of Home Buyers as Financial Creditors and thereby threshold limit for filing application i.e. 10% of total no. or 100 in no. under same real estate project - Section 5(8) Applicability of Limitation Act on the Insolvency and Bankruptcy Code - Section 238A Withdrawal of an application by COC having approval of 90% – Section 12A
- 4. 6 7 8 9 5 10 Major changes in IBC Allowing comprehensive corporate restructuring through merger, amalgamation and demerger under a resolution plan & Liquidation- Section 2(26) and Regulation 37 of CIRP Resolution plan shall be binding on the all stakeholders including the Central Government, any State Government- Section 31 Manner of distribution of amounts amongst financial and operational creditors under Resolution Plan- Section 30 Timeline for completion of CIRP increased to an overall limit of 330 days- Section 12 Corporate Debtor cannot not be prosecuted for any offence committed prior to commencement of the CIRP, if a resolution plan has been approved by the NCLT- Section 32A
- 5. Evolution of law through Judicial Pronouncements
- 6. ❑ Resolution plan is not approved by requisite percent of voting share of the financial creditors within the statutory period of 270 days, it is liable to be liquidated. – SC ❑ Only in exceptional cases over all limit of 330 days can be extended. - SC ❑ NCLT & NCLAT have no jurisdiction /authority to analyse or evaluate commercial decisions of COC- SC ❑ The role of RP under IBC is administrative and not adjudicatory - SC
- 7. ❑ Fair and equitable treatment of operational creditors means that a resolution plan should protect their interests but it did not mean proportionate payment of debts. – SC ❑ RBI issued circular directing banks for initiating CIRP against companies. In all the cases where banks have initiated CIRP due to said circular, all such cases are declared non est in law. RBI circular declared ultra vires as whole- SC ❑ NCLT on receipt of a rejected resolution plan is not expected to do anything more but is obligated to initiate liquidation process against the corporate debtor- SC ❑ For effective participation of directors in the meetings of COC, directors are entitled to receive copy of relevant documents including the insolvency resolution plans- SC
- 8. ❑ Once a resolution plan is approved by the CoC, it shall be binding on all stakeholders, including the guarantors. The resolution plan would therefore limit the guarantor's right of subrogation towards the creditor – SC ❑ Corporate Debtor cannot not be prosecuted for any offence committed prior to commencement of the CIRP, If A Resolution Plan Has Been approved by the NCLT- HC ❑ The NCLT has power and authority to pass an interim order to direct moratorium period over the corporate debtors if there is an apprehension of the selling off of the assets of the Corporate Debtor by its directors– NCLAT ❑ Exit route u/s 12A of the Code (i.e. for withdrawing the application) is only provided to the applicants invoking section 7,9,10 of the Code and not applicable to the resolution applicant.- NCLAT
- 9. 7 8 9 1 12 Journey so far.. Appeal/Reviewed, 312 Withdrawn, 157 Resolved, 221 Liquidation, 914 CIRP on going , 2170 Appeal/Reviewed Withdrawn Resolved Liquidation CIRP on going 3774 Companies under CIRP As on March 2020 Source IBBI 58% 8% 4% 6% 24%
- 10. Top 12 Defaulters Resolution Source IBBI S.no. Name of CD Successful Resolution applicant Amount Admitted (in cr) Amount Realised (in Rs cr) % of Claims Released 1 Electrosteel Steels Limited Vedanta Limited 13175 5320 40.38 2 Bhushan Steel Limited Bamnipal Steel Limited 56002 35571 63.50 3 Monnet Ispat & Energy Limited Consortium of JSW and AION Investments Pvt. Lt 11015 2892 26.26 4 Essar Steel India Limited Arcelor Mittal India Pvt Limited 49473 41018 82.91
- 11. Top 12 Defaulters Resolution Source IBBI S.n o. Name of CD Successful Resolution applicant Amount Admitted (in cr) Amount Realised (in Rs cr) % of Claims Released 5 Alok Industries Limited Reliance Industries Ltd., JM Financial Asset Reconstruction Company Ltd. 29523 5052 17.11 6 Jyoti Structures Limited Group of HNI led by Mr Sharad Sanghi 7365 3691 50.12 7 Jaypee Infratech Limited NBCC (India) Ltd 23176 23223 100.20 8 Bhushan Power and steel Limited JSW Ltd. 47158 19350 41.03
- 12. Top 12 Defaulters Source IBBI Amtek Auto Limited Under CIRP Under Liquidation Era Infra Engineering Limited Lanco Infratech ABG Shipyard Limited
- 13. Recovery % FY 2018 Recovery % FY 2019 Lok Adalats 4% 5% DRT’s 5% 3% SARFEASI 32% 14% IBC 50% 43% 9 12 Recovery under IBC v/s Other Forums Source IBBI,RBI
- 14. 7 8 9 12 Ease of Doing Business in India According to the Ease of Doing Business Report 2020, India’s overall ranking has improved by 67 places to 63rd position among 190 countries since the inception of the Code. With this India earned a place among the world’s top ten improvers in ease of doing business, for the third consecutive year The Code has improved the India’s ease of doing business’s ranking and also has resulted in better realization of dues by the creditors. 2016 2017 2018 2019 130 100 77 63
- 15. Ease of Doing busines in India and role of ‘resolving insolvency’ parameters Source: Economic Survey Report 2020 Particulars 2016 2017 2018 2019 2020 Rank in Resolving Insolvency 136 136 103 108 52 Time (yrs) 4.3 4.3 4.3 4.3 1.6 Recovery Rate (Cents in dollar) 25.7 26 26.4 26.5 71.6
- 16. COVID Related Amendments Enhancement of minimum default limit from Rs. 1 lakh to Rs. 1cr Suspension of Fresh Insolvency Proceedings for Six months (from 25.03.2020) which may be extended to 1 year No application shall ever be filed for the defaults occurred i.e. on or after 25.03.2020 (for Six months which may be extended to 1 yr)
- 17. ROAD AHEAD Insolvency Resolution Framework MSME Pre Package Insolvency Cross Border Insolvency Individual Bankruptcy
- 18. 01 Insolvency of borrowers who have assets or creditors in different jurisdictions, or are subject to insolvency proceedings in multiple jurisdictions. 02 03 Infographic Style Cross Border Insolvency Currently, only section 234 and 235 of the Code deal with cross border having limited scope. Separate Framework dealing with Cross Border Insolvency is yet to come. • Cross-border provision will empower foreign creditors to claim assets on insolvent Indian companies and vice versa. • Ease in Resolution • M&A outlook in India to improve • Boosts Investor’s confidence Meaning Existing Provisions/ Development Impact
- 19. 01 A pre package insolvency is a pre planned process in which financially distressed company and its creditors reach an agreement with a buyer for its sale prior to initiating CIRP. 02 03 Infographic Style Pre Package Insolvency Currently, there is no provision under the Code dealing with pre package insolvency. Separate Framework dealing with pre package insolvency is yet to come. • It will promote early debt restructuring in a manner that best achieves the Code's objectives. • Offer a chance to debtor company to revive the company while negotiating with creditors. • Management to put genuine efforts for revival • Continuity of business Meaning Existing Provisions/ Development Impact
- 20. 01 Under this framework, MSMEs themselves will be able to apply to initiate bankruptcy proceedings through this mechanism. 02 03 Infographic Style Insolvency Resolution Framework MSME Currently, Section 240A of the Code deals with MSME where exception is granted form section 29A (barring promoters to bid for company). Separate Framework dealing with resolution of MSME is expected to come soon. • Follow “debtor in control” model while ordinarily the corporate insolvency resolution process follows a “creditor in control” system. • No change in control • Self restructuring plan Meaning Existing Provisions/ Development Impact
- 21. 01 A debtor or creditor can file for Insolvency Resolution and upon failure on resolution, Bankruptcy proceedings can be initiated. 02 03 Infographic Style Individual Resolution and Bankruptcy for Individual Currently, Section 94- 148 of the Code deals deal with the Individual Resolution and Bankruptcy . Provisions in respect of personal guarantors are enforce however with respect to Individual and partnership are not yet enforced. Poor frameworks for recovery have had an adverse impact on the credit market, notifying individual insolvency provisions will bring financial discipline in the people as well. Meaning Existing Provisions/ Development Impact
- 22. 7 25 March 2020 12 Post Covid scenario For any default prior to 25.03.2020 • Financial discipline improve • Chances of Settlement might increase • Increase in reserve cash Action can be taken anytime (within limitation) For any default on or after to 25.03.2020 for six months (which may be extended to 1yr) No action can be taken during entire lifetime • Cost cutting , check on overheads • Changes in Business Model • Business to reach Optimum level
- 23. Thank You