Corporate Insolvency Resolution Process

What is the Corporate Insolvency Resolution Process (CIRP)?

The Corporate Insolvency Resolution Process (CIRP) is a legal process under the Insolvency and Bankruptcy Code, 2016 (IBC) that is used to resolve the insolvency of a corporate debtor. The CIRP is a two-track process that can either lead to the restructuring of the corporate debtor (through a process called insolvency resolution) or to the liquidation of the corporate debtor (through a process called liquidation).

Who can initiate the CIRP?

The CIRP can be initiated by any of the following:

  • A financial creditor
  • An operational creditor
  • The corporate debtor itself
  • The Government of India
  • The Reserve Bank of India

What are the steps in the CIRP?

The CIRP has the following steps:

  1. Admission: The first step is for the Adjudicating Authority (NCLT) to admit the application for CIRP.
  2. Moratorium: Once the application is admitted, a moratorium is imposed on the corporate debtor. This means that the corporate debtor cannot take any actions without the approval of the Resolution Professional (RP).
  3. Constitution of the Committee of Creditors (CoC): The CoC is a committee of creditors that is responsible for overseeing the CIRP. The CoC is composed of all the financial creditors of the corporate debtor.
  4. Appointment of the Resolution Professional (RP): The RP is a professional who is appointed by the CoC to oversee the CIRP. The RP is responsible for managing the corporate debtor’s assets and for preparing a resolution plan.
  5. Submission of resolution plans: Once the RP is appointed, resolution applicants can submit resolution plans to the CoC. A resolution plan is a proposal for how to resolve the insolvency of the corporate debtor.
  6. Voting on resolution plans: The CoC votes on the resolution plans that have been submitted. The resolution plan that receives the majority vote of the CoC is approved.
  7. Implementation of the resolution plan: Once the resolution plan is approved, it is implemented by the RP. The implementation of the resolution plan is supervised by the CoC.
  8. Liquidation: If the CIRP is unsuccessful, the corporate debtor will be liquidated. The liquidation process is overseen by the RP.

Multiple choice questions:

  1. Which of the following is not a step in the CIRP?
    • Admission
    • Moratorium
    • Constitution of the Committee of Creditors (CoC)
    • Appointment of the Resolution Professional (RP)
    • Implementation of the resolution plan

The answer is Implementation of the resolution plan. The implementation of the resolution plan is not a step in the CIRP, it is an outcome of the CIRP.

  1. What is the role of the Committee of Creditors (CoC)?

The CoC is a committee of creditors that is responsible for overseeing the CIRP. The CoC has a variety of powers, including:

  • Approving the resolution plan
  • Approving the liquidation process
  • Appointing and removing the Resolution Professional (RP)
  1. What is the role of the Resolution Professional (RP)?

The RP is a professional who is appointed by the CoC to oversee the CIRP. The RP is responsible for managing the corporate debtor’s assets and for preparing a resolution plan. The RP also has a variety of other powers, such as:

  • Investigating the corporate debtor’s affairs
  • Selling the corporate debtor’s assets
  • Approving payments to creditors
  1. What is the difference between insolvency resolution and liquidation?

Insolvency resolution is a process through which a corporate debtor can be restructured and revived. Liquidation is a process through which a corporate debtor’s assets are sold and the proceeds are distributed to creditors.