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Month: November 2023

Libord IRP Advisors Private Limited and the Role of Insolvency Professionals in India

In the dynamic business environment of India, companies may encounter financial challenges that require a strategic approach to restructuring and resolution. The Insolvency and Bankruptcy Code (IBC) introduced by the government has played a pivotal role in streamlining the insolvency process, and Insolvency Professionals (IPs) have emerged as key players in facilitating smooth insolvency proceedings. Libord IRP Advisors Private Limited stands as a noteworthy entity in the realm of insolvency, providing expert services in Mumbai and beyond.

Understanding the IBBI and Registered Insolvency Professionals:

The Insolvency and Bankruptcy Board of India (IBBI) serves as the regulatory body overseeing insolvency proceedings in the country. IBBI plays a crucial role in accrediting and regulating Insolvency Professionals (IPs) who act as intermediaries in the insolvency resolution process. These professionals are essential in maintaining transparency, fairness, and efficiency in the resolution proceedings.

Libord IRP Advisors Private Limited: A Trusted Name in Mumbai:

Libord IRP Advisors Private Limited has established itself as a trusted name in the insolvency landscape, particularly in Mumbai. As a registered insolvency professional firm, we bring a wealth of expertise to the table. Our team of professionals is well-versed in navigating the intricacies of insolvency proceedings, offering comprehensive solutions to businesses facing financial challenges.

Roles and Responsibilities of an Insolvency Professional:

Libord Insolvency Professionals play a multifaceted role in the insolvency resolution process. From conducting a thorough assessment of a company’s financial health to formulating a resolution plan, Our professionals act as facilitators between creditors and the distressed company. Our team of skilled professionals, exemplifies the dedication required to navigate the complex landscape of insolvency.

The Insolvency Resolution Process in India:

The insolvency resolution process involves several stages, and a registered insolvency professional plays a pivotal role at each step. From the initiation of insolvency proceedings to the formulation and implementation of a resolution plan, IPs ensure adherence to the legal framework outlined by the IBBI.

Libord IRP Advisors: Tailored Solutions for Distressed Businesses:

Libord IRP Advisors Private Limited understands the unique challenges faced by businesses in Mumbai and across India. Their team of insolvency professionals works closely with clients to develop customized strategies, considering the intricacies of each case. By leveraging their expertise, Libord IRP Advisors aims to facilitate the revival of distressed businesses and contribute to the overall economic health of the region.

Conclusion:

In conclusion, the presence of registered Insolvency Professionals and firms like Libord IRP Advisors Private Limited has significantly contributed to the effectiveness of insolvency resolution in India. As businesses continue to navigate financial uncertainties, the expertise provided by IPs becomes increasingly invaluable. Libord IRP Advisors stands as a beacon of reliability and professionalism in the field, exemplifying the commitment to ethical and efficient insolvency resolution practices in Mumbai and beyond.

Navigating Corporate Insolvency: Understanding the Ins and Outs of the CIRP

Introduction: Corporate Insolvency Resolution Process (CIRP)

In the ever-evolving landscape of business, corporations occasionally find themselves facing financial distress. The Corporate Insolvency Resolution Process (CIRP) becomes a crucial mechanism for addressing these challenges, providing a structured framework for resolution.

Understanding Corporate Insolvency Resolution Process:

Corporate insolvency resolution is a legal process designed to address the financial instability of a company in a systematic and transparent manner. The goal is to balance the interests of various stakeholders, including creditors, shareholders, and employees, while ensuring the revival of the distressed company or, if necessary, its orderly liquidation.

Key Elements of CIRP:

  1. Initiation of Insolvency Proceedings: The CIRP begins with the initiation of insolvency proceedings, typically triggered by a financial creditor, operational creditor, or the corporate debtor itself. The Insolvency and Bankruptcy Code (IBC) outlines the criteria and procedures for initiating the process.
  2. Appointment of an Insolvency Professional: Once the insolvency proceedings are initiated, an Insolvency Professional (IP) is appointed to manage the affairs of the company during the resolution process. The IP plays a crucial role in conducting a thorough assessment of the company’s financial position.
  3. Moratorium Period: A moratorium period is imposed upon the initiation of CIRP, during which creditors are prohibited from taking legal actions against the distressed company. This provides a breathing space for the resolution process to unfold without external disruptions.
  4. Corporate Insolvency Resolution Plan (CIRP): The heart of the process lies in the formulation and approval of the Corporate Insolvency Resolution Plan (CIRP). This plan outlines the strategies and measures to revive the company, addressing the concerns of creditors and other stakeholders.
  5. Approval by Committee of Creditors (CoC): The Committee of Creditors (CoC) plays a pivotal role in the approval or rejection of the CIRP. This committee, comprising financial creditors, holds significant decision-making power during the resolution process.
  6. Implementation of the Resolution Plan: Once the CoC approves the resolution plan, it is submitted to adjudicating authority for its approval once the it is approved, it would be implemented under the supervision of the Insolvency Professional. The objective is to restore the financial health of the company and ensure its sustainable operations.

Conclusion:

In conclusion, the Corporate Insolvency Resolution Process (CIRP) serves as a critical tool in addressing financial distress within the corporate sector. Understanding the nuances of this process is essential for businesses, creditors, and other stakeholders involved. As the corporate insolvency landscape continues to evolve, adherence to the established legal frameworks and collaboration between all parties involved are key to achieving successful resolutions and fostering a more resilient business environment.

Relevance of Valuations of Assets of Corporate Debtor under IBC, 2016 – Types of Valuations

Once a company is admitted into the Corporate Insolvency Resolution Process (CIRP), it is certain that either a resolution plan will be submitted by a new investor for a definite amount, or upon the failure of the resolution, the assets of the Corporate Debtor will be sold by the liquidator for a particular amount. But what is the specific benchmark amount that should guide the decision-makers (Committee of Creditors or the Liquidator) to arrive at a decision?

This is where the necessity of valuation reports, done by professional valuers, comes into play. The regulator IBBI has shown expertise in benchmarking the valuation processes, fixing eligibility criteria for the valuers, and maintaining a panel of Registered Valuers.

This write-up on valuations is intended to be easily understood by the common people; therefore, the contents have been kept straightforward and simple for their understanding. The use of intricate methods used for valuation by professional valuers is being avoided.

The assets of the Corporate Debtor have been segregated into the following three categories for the purpose of valuation:

1. Land & Buildings:

Leasehold Land: Land ownership can be held in two ways. The first method is ‘Leasehold,’ in which the ‘Lessor’ gives land to the ‘Lessee’ for industrial, commercial, or domestic use for a definite long-term period. A common example under this category is State industrial bodies (UPSIDC, NOIDA, GNOIDA, RICCO) leasing land to industrialists for setting up manufacturing or service-oriented units, or land given to real estate companies for developing housing projects. Another example is of State Housing Boards providing built-up flats or different sizes of plots for housing purposes to individual persons. In the case of leasehold allotments, the land property will revert to the lessor after the expiry of the lease period, subject to renewal/extension arrangements in the existing lease agreement. The consideration for lease rent may be an upfront amount or periodic payments by the lessee to the lessor.

Freehold Land: The possession and absolute legal ownership of the land parcel are transferred by the seller to the buyer upon payment of consideration through an instrument known as a ‘Conveyance Deed’ or ‘Registry’ in common language.

Building Structure: The building structure is erected by the owner of the land after getting the master plan approved by the concerned authorities and receiving approval from other related authorities like the Airport Authority, Environmental Department, etc.

Arriving at Valuations: The valuation of the land parcel is done by benchmarking it with the ‘Circle Rate’ fixed by the Government or the market-determined rates as per transactions closed during the last year or so in that area. Building structures are valued based on the cost of construction, discounted by depreciation, depending upon the quality of construction and the age of the building.

2. Plant & Machinery:

Valuers inspect the Plant & Machinery under valuation physically by visiting the plant or unit. Generally, the factors considered by valuers for valuation are the Type of Plant/Machinery, whether it’s imported or indigenous, the category of the supplier/vendor, remaining useful life, aging, or obsolescence, etc.

3. Securities & Financial Assets (SFA):

These are non-physical or book or soft assets as they are reflected in the balance sheets of the Corporate Debtor. The financial assets included in this category are Intangible Assets, Cash & Cash Equivalents, Trade Receivables, Loans & Advances, Investments, etc. When arriving at valuations, an assessment is made of the realizability of such assets.

4. General:

Valuations are categorized or determined as Book Value, Market Value, Fair Value, Liquidation Value, Valuation for sale as a going concern, depending on the process for which it is to be benchmarked.

Liquidation of a Company: Definition, Process, and Benefits

Liquidation of a company is a complex process that involves an understanding of multiple aspects. It only commences after a detailed analysis of various reasons.

When a debt-laden company is no longer in a position to continue its operations, the process of liquidation is initiated. The primary goal is to wind up the company’s operations and sell its assets to settle all its liabilities and any other outstanding obligations. The decision to proceed with liquidation is typically reached when it becomes evident that the company can no longer generate profits.

The causes of a company’s liquidation can vary, but insolvency is a common reason. Insolvency signifies the unwillingness or inability to continue operations profitably.

What Is the Liquidation of a Company?

In the event of a company’s bankruptcy, a liquidator sells off the company’s assets to repay its liabilities. Once the liabilities are settled, any remaining balance is distributed among the company’s shareholders.

To initiate the process of liquidation, a company must meet specific conditions and gain approval from the Adjudicating Authority. The liquidation order is granted by the Adjudicating Authority (AA) under the following circumstances:

  1. When a resolution plan is not received within the designated time.
  2. When the Adjudicating Authority (NCLT) rejects the submitted resolution plan for various reasons.
  3. When the Committee of Creditors (CoC) approves the liquidation of the corporate debtor.
  4. When the corporate debtor contradicts the approved resolution plan.

Once the Adjudicating Authority approves the liquidation order, the appointed resolution professional for the corporate insolvency process can assume the role of a liquidator. It’s important to note that the appointed resolution professional can be replaced by the Adjudicating Authority under the IBC (Insolvency & Bankruptcy Code). The liquidator must meet eligibility criteria as per the IB code and is responsible for overseeing the liquidation process until its completion.

Process of Liquidation

The liquidation process of a company begins with the systematic sale of all its assets, one by one, based on priorities and necessity. Cash and bank balances are excluded from this process.

The remaining funds are then distributed among the creditors after the repayment of liabilities. Repayment follows a predetermined order, with secured creditors taking priority. The remaining funds are used to settle preferential creditors, including government taxes and employee salaries.

After addressing the above debts, the remaining funds are allocated to pay debenture-holders, while any other miscellaneous liabilities secured by a floating charge on all assets are addressed. Unsecured creditors and preference shareholders are next in line for payment.

The final step involves determining if there is a surplus of funds after paying all the aforementioned creditors. If there is a surplus, these funds are distributed among the shareholders. In the case of a deficit, shareholders are required to pay any unpaid share of capital.

Types of Liquidation

The liquidation process is intricate and involves critical steps. Based on specific conditions and various factors, there are three main types of liquidation:

  1. Voluntary Liquidation: This type of liquidation is not forced by insolvency and is voluntarily initiated by the owner(s) or member(s) of the company. It indicates that the company is considered solvent and able to meet its creditor payments.
  2. Creditors’ Voluntary Liquidation: This type of liquidation occurs when the directors/shareholders of the company realize that it will default on creditor payments, and it does not involve court intervention.
  3. Compulsory Liquidation: This is a legal order from the court or adjudicating authority, declaring the termination of the company’s operations due to its inability to repay its liabilities.

Conclusion

Understanding the conditions, scenarios, and complexities of the liquidation process underscores the challenges involved in winding up a company’s operations. Upon successful completion of the liquidation process, the company ceases to exist as per the law.

At Libord IRP Advisors Private Limited, we are committed to providing complete assistance on valuations of assets of Corporate Debtor under IBC, 2016.