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Questions and Answers
The National Company Law Tribunal (NCLT) has adequate benches to handle all insolvency cases without causing delays.
The National Company Law Tribunal (NCLT) has adequate benches to handle all insolvency cases without causing delays.
False
Which of the following features distinguishes the Corporate Insolvency Resolution Process (CIRP) from the Pre-Packaged Insolvency Resolution Process (PIRP)?
Which of the following features distinguishes the Corporate Insolvency Resolution Process (CIRP) from the Pre-Packaged Insolvency Resolution Process (PIRP)?
What is the time frame for completing a Pre-Packaged Insolvency Resolution Process (PIRP)?
What is the time frame for completing a Pre-Packaged Insolvency Resolution Process (PIRP)?
120 days
The Corporate Insolvency Resolution Process (CIRP) applies to defaults more than ______.
The Corporate Insolvency Resolution Process (CIRP) applies to defaults more than ______.
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Match the following challenges with their descriptions:
Match the following challenges with their descriptions:
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Who can initiate the Corporate Insolvency Resolution Process (CIRP)?
Who can initiate the Corporate Insolvency Resolution Process (CIRP)?
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The Pre-Packaged Insolvency Resolution Process (PIRP) allows a transfer of management control to Resolution Professionals.
The Pre-Packaged Insolvency Resolution Process (PIRP) allows a transfer of management control to Resolution Professionals.
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How many cases out of the total have successfully reached resolution according to the challenges mentioned?
How many cases out of the total have successfully reached resolution according to the challenges mentioned?
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Which of the following is true regarding the Committee of Creditors (CoC)?
Which of the following is true regarding the Committee of Creditors (CoC)?
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The Insolvency and Bankruptcy Board (IBB) is responsible for overseeing insolvency professionals, agencies, and information utilities.
The Insolvency and Bankruptcy Board (IBB) is responsible for overseeing insolvency professionals, agencies, and information utilities.
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What priority do employee salaries have in liquidation proceedings?
What priority do employee salaries have in liquidation proceedings?
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The Pre-Pack Scheme, amended in 2021, is designed for MSMEs with defaults below Rs. ___ crore.
The Pre-Pack Scheme, amended in 2021, is designed for MSMEs with defaults below Rs. ___ crore.
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Match the following pillars of the IBC with their descriptions:
Match the following pillars of the IBC with their descriptions:
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Who can initiate the Corporate Insolvency Resolution Process (CIRP)?
Who can initiate the Corporate Insolvency Resolution Process (CIRP)?
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What is the maximum time allowed for completing the CIRP, including legal proceedings?
What is the maximum time allowed for completing the CIRP, including legal proceedings?
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The National Company Law Tribunal (NCLT) has no role in appointing Insolvency Professionals.
The National Company Law Tribunal (NCLT) has no role in appointing Insolvency Professionals.
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What happens if the resolution plan does not offer full recovery to operational creditors in the Pre-Pack scheme?
What happens if the resolution plan does not offer full recovery to operational creditors in the Pre-Pack scheme?
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Which category of entities was excluded from IBC 2016 until Section 227 was notified?
Which category of entities was excluded from IBC 2016 until Section 227 was notified?
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The process of winding up a company's affairs by selling its assets to pay off its debts is known as __________.
The process of winding up a company's affairs by selling its assets to pay off its debts is known as __________.
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Match the following terms with their definitions:
Match the following terms with their definitions:
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The role of the National Company Law Tribunal (NCLT) includes resolving cross-border insolvency cases.
The role of the National Company Law Tribunal (NCLT) includes resolving cross-border insolvency cases.
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Study Notes
Comparison of PIRP and CIRP
- PIRP is initiated solely by corporate debtors, while CIRP can be initiated by either corporate debtors or creditors.
- In PIRP, the resolution plan is submitted by the existing management, whereas CIRP employs a public bidding process for the resolution plan.
- Management retains control in PIRP; in contrast, control is transferred to Resolution Professionals in CIRP.
- PIRP pertains to defaults less than Rs. 1 crore, while CIRP applies to defaults exceeding Rs. 1 crore.
- PIRP has a timeframe of 120 days, compared to 180 days for CIRP.
Challenges and Remarks
- The resolution rate for insolvency cases is only 15%, with the majority leading to liquidation.
- Delays in the process are often due to a limited number of National Company Law Tribunal (NCLT) benches.
- Cross-border insolvency provisions have not yet been implemented in the current framework.
- The Insolvency and Bankruptcy Code (IBC) aims to enhance the insolvency process and improve the overall business environment in India.
Sample Multiple Choice Questions Highlights
- CIRP Initiation: Initiated by both corporate debtors and creditors.
- CIRP Maximum Duration: Maximum duration for completing the CIRP is 330 days, including legal proceedings.
- Appointment of Insolvency Professionals: Appointed by the National Company Law Tribunal (NCLT).
- Pre-Pack Resolution Plans: If a resolution plan does not fully recover operational creditors, a Swiss Challenge auction process is conducted.
- FSPs Exclusion: Financial Service Providers (FSPs) were initially excluded from IBC 2016 until Section 227 was notified.
Difficult Terms and Their Definitions
- Liquidation: Winding up a company's affairs by selling assets to pay debts.
- Adjudication: Legal process to resolve disputes or cases.
- Resolution Plan: A strategy to address a company's insolvency, which may involve restructuring or liquidation.
- Swiss Challenge: A process where a revised plan is open to competitive bidding.
Committee of Creditors (CoC)
- Composed exclusively of financial creditors.
- Determines the allocation of resolution proceeds among financial and operational creditors.
- NCLT has limited oversight on CoC decisions, emphasizing procedural fairness.
Key Components of IBC
- Insolvency Professionals: Regulated by specific agencies to ensure competent management of insolvency cases.
- Information Utilities: Provide electronic databases on lending and borrowing to mitigate disputes.
- Adjudication Bodies: NCLT deals with company insolvencies; Debt Recovery Tribunals (DRTs) handle individual cases.
- Regulator Role: The Insolvency and Bankruptcy Board (IBB) supervises the actions of insolvency professionals and related entities.
Employee Protection Measures
- Salaries owed to employees for up to 24 months are prioritized during liquidation proceedings.
Exclusions under IBC
- Financial service providers like banks and insurance companies were initially excluded from the IBC framework.
- Section 227 (notified in November 2019) allowed non-banking financial companies (NBFCs) with assets over Rs. 500 crores to resolve under IBC.
Pre-Pack Scheme (Amendment 2021)
- Designed for MSMEs with defaults under Rs. 1 crore, allowing current promoters to retain management control while proposing a resolution plan.
- A Swiss Challenge process occurs if the resolution plan does not provide full recovery for operational creditors.
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Description
This quiz covers the essential features of the Corporate Insolvency Resolution Process (CIRP) and the Pre-Packaged Insolvency Resolution Process (PIRP). Understand how these processes are initiated and the differences between them. Test your knowledge on the intricacies of corporate debt resolution.
