When any company slumps in such a way that it is not able to pay the debts of the creditors then that company is said to be insolvent company. Insolvency proceedings are operated under Insolvency and bankruptcy code 2016. Insolvency also includes cross border insolvency where the creditors are from outside India. When any parent company have its subsidiary outside India and that parent and subsidiary company undergoes insolvency than the role of cross border insolvency comes into play.
The process of such insolvency proceedings is known as CIRP (Corporate Insolvency Regulation Process) in which the appeal is heard in quasi-judicial body that is NCLT/NCLAT or DRT.
In Cross border insolvency the Centre of main interest (COMI) is taken into consideration to choose where the foreign-main-proceeding and foreign-non-main proceedings will take place. Centre of main interest is a place where the administration and accounting of the business of company takes place.
There are RP’s that is Resolution Professional assigned to each creditor and debtor to represent their case infront of NCLT and NCLAT.
There are two types of creditors:
Operational creditors: Operational creditor is a person to whom operational debt is owed for goods and services provided by him or her.
Financial creditors: Financial creditor is a person to whom Financial debt is owed for financial service provided by them.
There are also Guarantors involved in CIRP if they have acted as surety of a debtor. Guarantors can step into the shoes of creditor and have can recover the debt from debtor by using Right to Subrogation.
CIRP Process takes place in 180 days and if not than extra time of 90 days is given and after the decision is taken by NCLT or NCLAT the final Resolution plan is made and assets of the insolvent company is distributed among those creditors.
There are still so many questions disputed in insolvency which are yet to be answered. Need to make fine laws so solve such questions.