A Fast track Insolvency resolution process is desirable in cases where there have been many delays in debt repayment. Reliance Communication (RCom) is currently undergoing this procedure. This blog is going to explain all that you need to know about a faster version of insolvency resolution: a process that has to be completed within finite time and with finite resources.
Reliance Communications is currently going through the Fast-track insolvency resolution process. Its reason to start such a process comes in light of many delays in debt repayment and a lot of debt to be repaid. That being said, there is a lot of involvement with a fast tracked process of resolution that meets the eye. This blog details all the intricacies that you need to understand about it.
Fast Tracked Insolvency resolution: The definition
A fast tracked insolvency resolution is the process of resolving the insolvency of a corporate debtor with an extremely constricted time period:
- This process is to be completed within 90 days from the commencement or initiation of the insolvency resolution process.
- The insolvent company can ask for extension from the Adjudicating authority (in this case the NCLT). However, the extension allowed is fairly limited and is only up to 45 days. In simpler terms, an extension is allowed for a fast tracked process. However, it depends upon the decision of the NCLT and the maximum extension allowed is 45 days.
Types of Debtors covered under the Fast-Tracked CIRP (Corporate Insolvency resolution process)
Different types of corporate debtors are allowed to opt for a fast-tracked insolvency resolution process. They are as follows:
The debtors with assets and income as low as notified by the central government
- The debtors with a class of creditors notified by the Central government
- Small companies under Section 2 (85) of the companies act
- A start-up (excluding the partnership firms)
- An unlisted company with total assets not above INR 1 Crore in the previous financial year ( the year before the insolvency resolution process commencement)
How is the fast-tracked insolvency resolution process initiated?
Much like the conventional petition of insolvency resolution, the fast-tracked version can be filed by either the corporate debtor or the financial / operational creditor. The documents required to initiate such a process consists of an application and the following attachments:
- Proof that a default exist: Such a proof can be extracted from the information utility.
- Additional Proof of eligibility: Proof that the corporate debtor is eligible for a fast tracked CIRP.
Procedure for fast-tracked insolvency resolution process
The procedure of a fast-tracked resolution is similar to the general insolvency resolution process. The difference here being, instead of 180 days, the matter of insolvency is to be resolved within 90 days. Additionally, a quicker resolution is only needed in extreme situations. Understandably, the efficiency of such a process is also questionable. Therefore, before choosing the faster route to get a debt-free state, you should weigh in all your options.
That is all that you need to understand about a Fast Track insolvency resolution. Its case was recently presented in the Insolvency case of RCom. You can read that blog if you want to know about some intricacies of Insolvency and Bankruptcy.