Understanding Complete CIRP Management Process
Posted: Mar 15, 2020
The Corporate Insolvency Resolution Process (CIRP) helps creditors to recover their investment. If a company becomes insolvent, the resolution process is initiated by applying to the National Company Law Tribunal (NCLT). To apply, creditors first have to show the debt that tops one lakh rupees. The NCLT must issue an order within 14 days, either approving or declining the submission.
The insolvency process is to determine whether the debtor is in a position to repay or not. Resolution professionals assess the assets and income to determine the capability for repayment. If a company cannot repay the debt, the company will be restructured or liquidated. The two ways to check corporate insolvency are listed below:
- The cash-flow test?—?It determines whether the company, either now or in the future, is unable to pay its debts when they fall due for repayment.
- The balance sheet test?—?This is to check whether the value of the company’s assets is less than the value of its current and future liabilities.
Choosing the right CIRP management software can be tricky. There are plenty of CIRP platforms and tools out there, and you should always look for one that can streamline the management process. Solvemint is a complete suite of software created to serve as a one-stop solution to insolvency management. It provides accountability, security, and transparency through automation. We have listed down some of the CIRP management essentials Solvemint can help you with:
- IBBI Compliance Management
- CIRP Timeline with Deadline Reminders to Team
- Stakeholders Management
- Claims & EOI Management
- Status Page, Reporting & Analytics
- End-to-End Process Management
- IP & Assets Management
- Bids & Auction Management
- E-Voting Management
- Communication Management
- Automatic Notice Generator
This web-based tool keeps resolution professionals updated with the latest industry trends and complies with the Insolvency and Bankruptcy Code known as IBC 2016 as well. Solvemint offers an online demo, and you can get it by sending a demo request without filling in your Credit Card details. As per the Insolvency and Bankruptcy Code, the following are the steps to initiate the corporate insolvency resolution process:
1. Application to the NCLT
A creditor or the company itself may apply to the National Company Law Tribunal (NCLT). Financial creditors have different obligations to fulfil as well when making applications to the NCLT. A creditor must submit the default record or demand for his unpaid debt.
2. Interim Resolution Professional and Moratorium
If a corporate debtor is accepted into the CIRP, the board of directors is suspended. The company is put under an interim resolution professional. From that stage onwards, the management ceases any authority of business operations until the end of the CIRP.
3. Verification of claims and formation of Committee of Creditors (CoC)
The interim resolution professional validates the claims made by the creditors. Within 30 days of being admitted into CIRP, a Committee-of-Creditors (CoC) containing all the financial creditors is formed.
4. Appointment of Resolution Professional.
Within seven days of forming the CoC, the NCLT appoints a new resolution professional. It may also choose to appoint the interim resolution professional as a resolution professional.
5. Resolution plan approval
A resolution plan needs to be issued within 180 days from the commencement of CIRP. The NCLT holds the authority to extend this timespan by another 90 days. Any individual, management, creditors, or even a third party can propose a plan.
If you’re a resolution professional or planning to buy a tool for seamless CIRP management experience, Solvemint can be very effective. It enables you to communicate effectively with bulk emailers and handle thousands of shareholders without any hassles. It can significantly release your workload with its well-defined workflows as well. In line with the guidelines set by the new insolvency and bankruptcy code, it also helps resolution professionals to maintain transparency throughout the entire process.