Looking For Recovery Of Bad Debt?
Have you been haunted continuously by the nagging question of how to recover my bad debts?
If the value of debt exceeds rupees one lakh, then there is a legal tool provided by IBC where the creditor can initiate insolvency proceedings against the debtor.
How Does Corporate Insolvency Resolution Work?
The initiation of insolvency begins by filing an application to the NCLT, furnishing all the relevant details including the name of an insolvency resolution professional.
Both financial and operational creditors can apply for insolvency. Additionally, if you are a corporate debtor, who owes a debt to creditors, then you also can apply for insolvency.
Section 21 (2) of the Code mandates the resolution professional to form a creditors committee as per the rules. A resolution plan shall be considered viable only if 75% of creditors approve of it.
When Does Liquidation Of Company Occur?
A corporate debtor may face liquidity if:
- Any time during the insolvency resolution process, 75% of the creditor’s committee resolves to liquidate it.
- If the creditor’s committee fails to finalize a resolution within the stipulated 180 days.
- The resolution plan submitted by the committee is rejected by the NCLT.
Once the liquidation order is passed a moratorium shall be imposed on the corporate debtor and its assets.
Who Is A Liquidator? What Is His Role?
When the liquidation of a company occurs, a liquidator is appointed by the creditors in the meeting, or he may be officially appointed by the court to work towards the liquidation process.
The liquidator appointed by the court, also known as ‘receiver’ in layman’s language, is the key figure who is bestowed with the crucial powers for winding up the company.
Liquidator- Wide Range of Duties & Functions
A liquidator’s main duties are-
1. Provide Notice: He shall first & foremost, give notice to all concerned, regarding his appointment as a liquidator.
2. Scrutinize Company’s Affairs: The liquidator shall look into all developments in the company since its inception, and investigate accordingly.
3. Submit Preliminary Report: Within six months he shall submit a preliminary report, covering all aspects of the company’s financial health.
4. Assess Company’s Assets: The liquidator’s fundamental duty is to realize and recover the assets of the company, so that it can be utilized towards repaying the creditors, etc.
5. Form Winding Up Committee: The liquidator is bound by law to form a winding-up committee, which shall comprise of the official liquidator, nominees of secured creditors, and the resolution professional appointed by the tribunal.
6. Hold Meetings & Prepare Reports: The liquidator has to convene the meetings of the said committee and accordingly prepare the report, forward to the tribunal from time to time.
7. Secondary Duties: These are basically personal attributes which are essential for a liquidator to possess.
- Should be competent & diligent
- Should be impartial
- Should be responsible
- Should maintain confidentiality
Liquidator Plays A Pivotal Role In Liquidation of A Company
Irrespective of the fact that whether a liquidator is appointed by a company or a court, his role is of paramount importance in the entire liquidation or winding-up process. He has the responsibility to see that the process of liquidation comes to a conclusive end, with the best outcome!
“Recovering of debts from corporate debtors, or winding up a business satisfactorily, depends majorly on the liquidator & his capabilities!”
-Shweta Gupta, Founder, and CEO, MUDS