With an aim to complete an insolvency petition even faster, in 90 days, for small companies, companies where there are not a lot of transactions / operations, the Insolvency and Bankruptcy Board of India has notified the sections 55 to 58 of the Insolvency and Bankruptcy Code 2016 and the draft of Insolvency and Bankruptcy Board of India (Fast Track Insolvency Resolution Process for Corporate Persons) Regulations, 2017 with effect from 14 June 2017.
It is believed that these regulations help in faster and easier completion of bankruptcy proceedings.
The fast track process applies to the following categories of corporate debtors:
- a small company, as defined under clause (85) of section 2 of the Companies Act, 2013;
- a Startup (other than the partnership firm), as defined in the notification dated 23 May 2017 of the Ministry of Commerce and Industry;
- an unlisted company with total assets, as reported in the financial statement of the immediately preceding financial year, not exceeding Rs.1 crore.
The criteria for an Insolvency Resolution Professional (IRP) are:
- An insolvency professional can be resolution professional if he, all his partners and directors are independent of the corporate debtor.
- Not eligible if he or the insolvency professional entity of which he is a partner or director,is under a restraint order of the Board.
- Shall not continue as resolution professional of he or entity where he is director or partner or any other of his director or partner represents any other stakeholders in the same fast track process.
The Insolvency and Bankruptcy Board of India (Fast Track Insolvency Resolution Process for Corporate Persons) Regulations, 2017 also provides that if committee thinks that fast track process cannot be completed within 90 days then it may instruct the resolution professional to make an application to the Adjudicating Authority. However, the Adjudicating Authority may, if satisfied, extend the period of 90 days by a further period up to 45 days for completion of the process.
Further, Interim Resolution Professional (IRP) shall file a report certifying constitution of committee to Adjudicating Authority before expiry of 21 days from the date of his appointment. Based on records, if interim resolution professional is of opinion that fast track process is not applicable to corporate debtor, he shall file an application to Adjudicating Authority along with the report to pass an order converting the fast track process to corporate insolvency resolution process. If Adjudicating Authority passes on order of such conversion, the process shall be carried on in accordance with Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016.