Top 50 Interview Questions On The Insolvency And Bankruptcy Code, 2016

INTRODUCTION

Insolvency and Bankruptcy Code, 2016 (“Code”)was published in the official gazette on 28th May 2016 after passing in Parliament. As part of the effort to align insolvency laws with international standards, this policy has been hailed as a major economic development.

In the past, parliament has attempted to ensure public debt recovery (through the Recovery of Debts due to Banks or Financial Institutions Act, 1993,) and securitization (under the Securitization and Reconstruction and Enforcement of Security Interests Act, 2002) deal with some aspects of corporate insolvency. The desired outcomes did not occur.

As part of the Code, several objectives are being pursued, such as promoting enterprise and availability of credit, balancing the interests of all stakeholders; and resolving insolvencies within a reasonable period for corporations, partnerships, and individuals.

The code was enacted to address the deficiencies in India’s staggered insolvency laws and to bring them under one law, which faces a monumental challenge and to be held to an equally monumental standard.

Based on data available with the World Bank in 2016, insolvency resolution in India currently takes on average 4.3 years, while it takes one year in the United Kingdom, 1.5 years in the USA, and two years in South Africa.

According to the World Bank Ease of Doing Business Index 2015, India is ranked 135th out of 190 countries in terms of how easy it is to resolve insolvency. As a result, the Code appears to be perhaps the most critical legislation introduced in recent years to impact India’s ease of doing business.

The Code’s institutional framework is its most noteworthy feature. Insolvency professionals, information utilities, and adjudication mechanisms are all part of this framework [Insolvency and Bankruptcy Board of India and National Company Law Appellate Tribunal (NCLAT)].

These structures and institutions are intended to support corporate governance and facilitate a time-bound and formal resolution of insolvency. Under the Code, there is a two-step insolvency resolution process for corporate debtors where a default of Rs.100,000/- is the minimum amount.

In this article, Team YLCC brings you the Top 50 Interview Questions on Insolvency and Bankruptcy Code, 2016.

TOP 50 QUESTIONS

According to the Code, two processes are created. First, the insolvency resolution process (Sections 6 to 32 of the Code) in which creditors evaluate whether the debtor’s business can continue and, if so, what are the options for its revival, and second, the liquidation process (Sections 33 to 54 of the Code) in which creditors determine whether closing the company should be considered a viable option. Winding up entails the distribution of the debtor’s assets.

The following are the top 50 questions you need to be aware of while preparing for an interview with the Code.

1. What is the sole purpose of the enforcement of the Code?
2. What is the application of the Code?
3. Who is a Corporate Debtor?
4. Who shall be the Corporate Person?
5. Under the code, who authorises the resolution plan?
6. Who qualifies as an applicant under Section 7 of the Code?
7. Who makes up the creditors’ committee?
8. What is considered to be the territorial jurisdiction regarding corporate insolvency resolution and liquidation?
9. In the case of the Code, what is the highest level of appeal?
10. What is the deadline for filing a Supreme Court appeal?
11. What is ‘Claim’ under the Code?

1. Who will receive the notification of the creditors’ committee meeting?
2. When did the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016 come into effect?
3. What shall be included in the definition of a Financial Service Provider?
4. What is the deadline for the insolvency resolution process to be completed?
5. What is the duration of the extension for completing the insolvency resolution process?
6. Who will issue a moratorium?
7. What is the impact of a moratorium order?
8. How does the Code impact the other legislations?
9. Which laws were repealed as a result of the implementation of the Code?
10. Who can start/initiate a Corporate Insolvency Resolution Process?
11. What is considered ‘debt’ under the Code?
12. What does the Commencement Date for Corporate Insolvency Resolution mean?
13. Which form should an authorised representative use to submit dues to a large number of workers or employees?

1. What is the difference between Financial Creditor and an Operational Creditor?
2. Is a secured creditor considered a financial creditor?
3. Is it possible for an operational creditor to assign or lawfully transfer an obligation to a financial creditor?
4. What should Financial Information (as defined under the Code) contain?
5. What must be included in a transfer according to the Code?
6. When will a corporate person be subject to the provisions of insolvency and liquidation?
7. Who is the Corporate Persons’ Adjudicating Authority?
8. Is it possible for a financial creditor who is not in default to file a resolution application?
9. Can an operational creditor issue a Demand Notice in any format?
10. What forms should Financial Creditors, Operational Creditors, and Financial Debtors utilise to apply with the National Company Law Tribunal (NCLT)?
11. What is the penalty for defrauding creditors through transactions?
12. Which grounds are excluded from the definition of misconduct in the context of a corporate insolvency resolution process?
13. What is the penalty for falsifying a corporate debtor’s books?
14. Is there any option for relaxation in the filing of relevant supporting documents to an insolvency resolution application if the accompanying documents are extremely large?
15. In the case of a meeting of the creditors’ committee, what constitutes a quorum?
16. Who can be appointed as registered valuers?
17. What is the vote requirement for creditors to approve a resolution plan?
18. What does the resolution professional required to do if the estimate of the liquidation value of two registered valuers is different?
19. Which of the tasks cannot be completed by a professional who specialises in interim resolution?
20. Is there any restriction on the financial creditor’s representation or vote at the meeting of the committee of creditors if he is related to the corporate debtor?
21. When should the resolution professional distribute the meeting minutes to all attendees?
22. What is the time limit for an operational creditor to start the insolvency process after receiving a notification or invoice seeking payment?
23. In which form the public statement by the interim resolution professional must be made?
24. What are the requirements for an insolvency professional to be appointed as a Resolution Professional in a corporate insolvency resolution process?
25. What options does a creditor have if he fails to produce proof of claim within the time frame specified in the public announcement?

1. When must the resolution professional tell the participants and the Adjudicating Authority of any changes in the committee as a result of the debt transfer?

YLCC would like to thank Nikunj Arora for his valuable insights in this article.