Status as on: 14/07/2023
WHAT IS FTCIRP (Fast Track Corporate Insolvency Resolution Process)?
Chapter IV (Sections 55 to 58) of the Insolvency and Bankruptcy Code, 2016 explicitly provides for a fast-track corporate insolvency resolution process (CIRP) for certain eligible companies. The fast-track CIRP is designed to expedite the insolvency process for smaller companies and enable their efficient restructuring or liquidation. In simple words, this procedure aims to eliminate the excess delay in the insolvency process of a small-scale company, which does not require a large number of days for winding up.
WHO IS A CORPORATE DEBTOR IN A FTCIRP? (Section-55)
An application may be made in respect of the following corporate debtors-
- A Small-sized company (as defined under Section 2 clause (85) of the Companies Act, 2013);
- A startup other than a partnership firm (as defined by the Ministry of Commerce and Industry);
- An unlisted company with total assets of less than one crore rupees (as reported in the financial statement of the preceding financial year).
WHAT IS THE TIME PERIOD FOR COMPLETION OF FTCIRP? (Section-56)
FTCIRP must be completed within 90 days from the insolvency commencement date and a further extension of 45 days can be granted by the NCLT only once, by a vote of 75% of the Committee of Creditors (CoC).
HOW FTCIRP IS INITIATED? (Section-57)
To initiate a fast-track CIRP, an application shall be made filed by a creditor (including both financial as well as operational creditors) or a corporate debtor and the following documents must be annexed-
- Proof of the existence of default upheld by the records available with the information utility.
- Any such other information specified by the Board.
WHAT IS THE PROCEDURE FOLLOWED DURING FTCIRP? (Section-58)
Step– I- Filing of an application for initiating FTCIRP as per section 57 of the Code.
Step– II- Appointment of an IRP by the Adjudicating Authority.
Step– III- Public Announcement made by the IRP within three days of his appointment.
Step– IV- Submission of claims of all, within 10 days of the appointment of IRP and verification of the submitted claims within 7 days of submission of the last claim.
Step-V- Formation of Committee of Creditors (CoC) and meetings are conducted by the Resolution Professional.
Step-VI- Appointment of a Registered Valuer within 7 days of appointment of RP, for determining the fair value for the assets of CD.
Step– VII- Formation of a Resolution Plan.
Step-VIII- Submission and Approval of the Resolution Plan by the Adjudicating Authority.
CONCLUSION:
The concept of fast-track corporate insolvency resolution process has been introduced in the Insolvency and Bankruptcy Code, 2016 to skip the long-lasting legal battles with various courts and to fasten the insolvency resolution process of small-sized firms, which does not require a large number of days for completing their insolvency process. The best thing about FTCIRP is that the procedure followed is the same as a regular CIRP but it is revved to wind up in a shorter span of time.
Disclaimer: The above article is based on the personal interpretation of the related orders and laws. The readers are expected to take expert opinions before relying upon the article. For more information, please contact us at ibc@centrik.in.
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