Answer ... (a) Debtor
Insolvency and Bankruptcy Code: Under the Insolvency and Bankruptcy Code, no role, rights, or obligations are outlined. Once the debtor has declared insolvency, the board of directors is suspended and the (interim) resolution professional is given management authority. As a result, the (interim) resolution professional represents the debtor in the corporate insolvency resolution process for all intents and purposes.
Companies Act: Under the Companies Act, the debtor suggests the plan and submits applications to the NCLT for its approval, together with any appropriate reports, statements and other documentation. The debtor is in charge of managing the entire procedure for getting the scheme approved, including notifying creditors.
(b) Directors of the debtor
Insolvency and Bankruptcy Code: Under the Insolvency and Bankruptcy Code, the powers of the board of directors are suspended once the debtor has been admitted to a corporate insolvency resolution process and are exercised by the (interim) resolution professional. To help the (interim) resolution expert manage the debtor’s affairs, the directors must offer full cooperation and support. Although they cannot vote, the directors can attend the creditors’ committee meeting and can offer feedback on the proposed resolution plans.
Companies Act: Under the Companies Act, there are no prescriptive roles, rights or obligations, other than the requirement that the debtor’s board of directors approve the scheme.
(c) Shareholders of the debtor
The shareholders have no prescribed role, rights or responsibilities.
(d) Secured creditors
Insolvency and Bankruptcy Code: Under the Insolvency and Bankruptcy Code, no specific role, rights or obligations are set forth for secured creditors. A moratorium is in place during the insolvency resolution process, meaning that no creditor may act or enforce its security during that time. Instead, the (interim) resolution professional will receive the creditors’ claims, which will subsequently be addressed in the resolution plan. Each financial creditor is represented on the creditors’ committee (including secured and unsecured financial creditors). Each financial creditor (secured and unsecured, excluding a related party to the creditor) is entitled to one vote per voting share in the creditors’ committee. To guarantee the smooth operation of the process, all creditors are expected to cooperate with and support the (interim) resolution professional.
Companies Act: Under the Companies Act, classes of creditors will normally be established by the NCLT, and secured and unsecured creditors will be called to meetings. A class of creditors holding 75% or more of the value of the class must approve the plan in order for it to pass. However, the scheme may be opposed by a person that owns at least 10% of the shares or has debts totalling at least 5% of the total outstanding debt.
(e) Unsecured creditors
Unsecured creditors have no prescribed role, rights or responsibilities.
(f) Employees
Insolvency and Bankruptcy Code: Under the Insolvency and Bankruptcy Code, the (interim) resolution professional is entitled to receive claims from employees, which will be addressed in the resolution plan. Employees must report to the (interim) resolution professional and offer all support and cooperation required for that person to manage the debtor’s affairs.
Companies Act: Employees have no prescribed role, rights or responsibilities.
(g) Pension creditors
Pension creditors have no prescribed role, rights or responsibilities.
(h) Insolvency office holder
Insolvency and Bankruptcy Code: Under the Insolvency and Bankruptcy Code, the insolvency office holder:
- invites, collates and verifies the creditors’ claims;
- manages the debtor’s affairs and runs the company on a going-concern basis;
- takes full control and custody of the debtor’s assets;
- constitutes the creditors’ committee and conducts meetings;
- prepares the information memorandum and invites prospective applicants to submit resolution plans for the debtor;
- reviews the resolution plans for compliance with the Insolvency and Bankruptcy Code and presents them to the creditors’ committee;
- files applications for the avoidance of transactions; and
- submits the resolution plan approved by the creditors’ committee to the NCLT.
Companies Act: There is no insolvency office holder in respect of a scheme under the Companies Act.
(i) Court
Insolvency and Bankruptcy Code: The NCLT is the adjudicating authority under the Insolvency and Bankruptcy Code. The role of the NCLT is:
- to admit the petition for the commencement of the corporate insolvency resolution process;
- to appoint the interim resolution professional;
- to pass orders on various applications that may be filed by the interim resolution professional under the Insolvency and Bankruptcy Code; and
- to approve or reject the resolution plan approved by the creditors’ committee.
The NCLT can also entertain and dispose of the following:
- any application by or against the debtor;
- any claim made by or against the debtor, including claims by or against any of its subsidiaries in India; and
- any question of priorities or any question of law or facts arising from or in relation to the corporate insolvency resolution process.
Companies Act: Under the Companies Act, the NCLT is the sanctioning body for the scheme’s approval. The NCLT convenes meetings of the creditors or classes of creditors in response to a request for compromise made through the scheme and designates a chairperson for the meetings. Additionally, it hears petitions for and against the plan; and it has the authority to order changes to the scheme.
The appellate body that hears appeals against NCLT rulings is the National Company Law Appellate Tribunal (NCLAT). It is possible to appeal an NCLAT ruling to the Supreme Court of India.