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World Bank Doing Business Insolvency rating for 2016: 136/189 countries (against 136/189 countries in 2015).
Collecting in India
• DSOinIndiaishighwithpaymentsusuallytakingplacearound75daysonaverage.Latepaymentsarenotregulatedandownershipprotectionmaybedifficulttoenforce.
• Thecourtsystemiscomplexwhilstextensivedelaysandcostsmakelegalactiondifficult.Acceleratedproceedingsarenotavailableforundisputeddebtsandforeigndebtjudgmentswouldbeenforcedwithdifficulty.
• Theinsolvencyframeworkismadeupofseveraloverlappingbodiesoflawsappliedbyconflictingpublicauthorities.Thus,itisextremelydifficulttoseethroughthesystem.
Collection complexity
Complexity relating to
Notable High Very High Severe
Payments
Court proceedings
Insolvency proceedings
NotableSevere
Euler Hermes Collections
CollectionProfileIndia
ContentsGeneral Information........................................................................................................................................3
Availabilityoffinancialinformation................................................................................................................3Maincorporatestructures...............................................................................................................................3Regulatoryenvironment..................................................................................................................................3
Getting Paid........................................................................................................................................................4
DaysSalesOutstanding(DSO).......................................................................................................................4Latepaymentinterest.......................................................................................................................................4Debtcollectioncosts.........................................................................................................................................4Ownershipprotection......................................................................................................................................4Payments.............................................................................................................................................................4
Collecting Overdues........................................................................................................................................5
Amicableaction................................................................................................................................................. 5Legalaction......................................................................................................................................................... 5Alternativestolegalaction..............................................................................................................................6
Handling Insolvent Debtors.......................................................................................................................... 7
Insolvencyproceedings................................................................................................................................... 7
Days Sales Outstanding (DSO): PaymentsinIndiausuallytakeplacearound75daysonaverage.
General information
Availability of financial informationAccessingfinancialinformationinIndiaisverydifficultasmostbusinessesarerunthroughnon-incorporatedSoleProprietorshipandPartnershipmodelswhichdonotrequirecommunicatinganyfinancialinformationtothepublic.Informationprovidedbyincorporatedentitiesisfairlyreliable,otherwiseitisnecessarytorelyonspecializedproviders.EulerHermesallocateseachcompanyagradereflectingitsfinancialhealthandhowitconductsbusiness.EHgradesrepresentacoreofEulerHermes’knowledgeandanalyses,andhelpclientsidentifyandavoidrisk.Dataiscontinuouslymonitoredtoofferthemostup-to-dateinformationtosupportmanagementdecisions.
Main corporate structuresLiabilityforbusinessdebtsisdeterminedbylegalstructures,whichmaybedescribedasfollows:
◾ SoleProprietorshipisavailableforsmallbusinessesmanagedbyanindividualandforwhichnocommercialstructureisnecessary.Inthiscase,theownerisheldliableforallbusinessdebts.Twoormore(uptoteninthebankingbusiness,uptotwentyotherwise)individualsmayalsodecidetoshareownershipandresponsibilitiesthroughPartnerships(undertheIndianPartnershipActof1932),inwhichcasethepartnersmaybejointly,individuallyandunlimitedlyliablefortheactionsoftheotherpartners.LimitedLiabilityPartnerships(LLPs)mayalternativelyofferlimitedliabilitytothepartners(undertheLimitedLiabilityPartnershipActof2008).
◾ PrivateLimitedCompanies(regulatedundertheCompaniesActof1956)areinpracticethemostfavoredlegalentitiesbecausetheyrequirenominimumcapitalfundswhilstthepartners’liabilityislimitedtotheircontribution.PublicLimitedCompaniesareratherusedforlargerstructureswhichcapitalmustbedividedintotradableshares.Intheseentities,theshareholders’liabilityislimitedtothevalueoftheirshares.
◾ ForeignbusinessestendtosettleinIndiathroughJointVentureCompaniesandWhollyOwnedSubsidiaryCompanies(WOS).RepresentativeOfficesmayalsobesetupinordertoconductliaisonfunctionswithoutpursuingcorebusinessactivitiesandincomecreation.Alternatively,BranchOfficesareallowedtoconductbusinessactivitiesundertheForeignExchangeManagementRegulations.
◾ TheCompaniesActof2013wasenactedinAugust2013butisonlypartiallyinplacesothatitseffectsarenotfullyoperationalyet.Nonetheless,itmaybeaddedatthispointthattheActwouldsoonprovideforanewOnePersonCompany(OPC)aswellasaSmallCompanyandaDormantCompany(conductingactivitieswithnoeconomicsignificance).
Regulatory environmentThecourtsysteminIndiaisnotveryefficientbecauseitisoverlyslow.Basedonaquasi-federalstructure,thecountryiscomposedoftwenty-eightStateswhichusuallypossessorshareaHighCourt(twenty-fourintotal)andofseveralhundredsofadministrativedistrictswhicheachpossessaDistrictCourt.Asageneralrule,commercialdisputesmustbebroughtbeforeDistrictCourtswherethecauseofactionaroseorwherethedebtorresides/carriesonbusinessorpersonallyworksforgain,butthequantumofdebtindisputealsomatters.TheDelhiHighCourthasoriginaljurisdictionandisalsocompetenttohearrecoverysuits,howevertheBombayHighCourt(Mumbai)hasnoauthoritytodealwithsuchclaims.Inaddition,variousspecializedcourtsdealspecificallywithspecificdebtrecoveryissues(bankloans,etc.),competitionandanti-trustlitigation,consumerprotection,etc.
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Getting Paid
Days Sales Outstanding (DSO)PaymentsinIndiausuallytakeplacearound75daysonaverage.Thelocalpaymentcultureisgoodbutlocalpartnersusuallyinsistonobtainingfavorablepaymenttermsof60daysormoreeventhoughonly20%oftransactionsarepaidontime.Thereforeapprovingsuchtermsisnotadvisable.
Late payment interestIndianlawdoesnotregulatelatepaymentsanddoesnotprovideforalegallatepaymentinterestrate.Havingsaidthis,thecourtsgenerallyawardspaymentofinterestontheoverdueamountintheirjudgments,evenifthereisnoagreementrelatedtopaymentofinterestbetweentheparties.Howeverinamicablecollection,asapractice,debtorsdonotpayinterestontheoverdueamounts.
Debt collection costsAsageneralrule,collectioncostsarenotchargedtothedebtorinIndiaandmustberecoveredthroughlegalproceedings.
Ownership protectionThelawentitlesasellertoretainownershipovergoodsuntilitsbuyerhaspaidtheinvoiceinfull,aslongasawrittenagreementhasbeenconcludedbetweentheparties.RetentionofTitle(RoT)provisionsarefairlycommoninsupplycontracts,butitisuncertainwhetherthecourtswouldinpracticerecognizethemostsophisticated‘allmonies’provisionsaimingatretainingownershipdespitetransformationorsaleofthegoodstoathirdparty.
PaymentsThemostcommonpaymentmethodsasfollows:SwiftbanktransfersarebecomingincreasinglypopularinIndiaastheyarefast,secured,andsupportedbyanincreasinglydevelopedbankingnetworkinternationallyanddomestically.Forexporttransactions,transfersshouldnonethelessbeguaranteedthroughanExportCreditInsurance,whichhelpsminimizingtheriskofsuddenorunexpectedcustomerinsolvency.EulerHermes’worldwidenetworkofriskofficesmonitorsthefinancialwell-beingofyourcustomersandgrantsthemaspecificcreditlimituptowhichyoumaytradeandclaimshouldsomethinggowrong.Alternatively,StandbyLettersofCredit(abankguaranteesthedebtor’screditqualityandrepaymentabilities)constitutereliableguarantees.IrrevocableandconfirmedDocumentaryLettersofCredit(adebtorguaranteesthatacertainamountofmoneyismadeavailabletoabeneficiarythroughabankoncecertaintermsspecificallyagreedbythepartieshavebeenmet)mayalsobeconsidered.Suchbankguaranteeshowevertendtobeexpensive,whilstobtainingthemrequirespatience.Asaresult,negotiatingdownpaymentsiscommonandadvisable.post-datedchequesisalsofrequentastheseconstituteamethodofpaymentaswellasadebtrecognitiontitleallowingthesellertoinitiatelegal(andinsolvency)proceedingsagainstthedebtorwhenthechequeremainsunpaid.
Late payment interest: Indianlawdoesnotregulatelatepaymentsanddoesnotprovideforalegallatepaymentinterestrate.
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Collecting overdues
Amicable actionNegotiatingBecausethejudicialsystemisoverlyslowandcostly,amicablesettlementopportunitiesconstitutethestrongestalternativetoformalproceedings.Beforestartinglegalproceedingsagainstadebtor,assessingitsassetsisessentialasitallowsverifyingwhetherthelatterisstillinactivityandwhetherrecoverychancesareatbest.Inaddition,itisessentialtobeawareofthedebtor’ssolvencystatus:ifinsolvencyproceedingshavebeeninitiated,itindeedoftenbecomesimpossibletoenforceadebt.Inpractice,althoughconciliationandmediationarenoprerequisitestoconductinglegalaction,thecourtsseemtobeincreasinglyinvolvedinhelpingthepartiestoreachanamicablesettlement.Sometimes,thejudgeswouldactuallydraftthetermsofanagreementsandleavethepartiestodecideontheiracceptabilitybeforereferringthecasetoADR.
Legal action
Ordinary proceedingsIftheamicablephasefailsorifthedebtorquestionstheclaim,theoptionofstartinglegalproceedingsremains.Nofast-trackproceedingsareavailableandtheoutcomeofalawsuitishaphazard,buttheprocesswouldnonethelesstakeplaceasfollows.Aclaimmustbefiledwiththecourt,whichthenservesthedebtorwithsummonsiftheclaimisdeemedadmissible.Thedebtoristhengiventhirtydays(sixtydaysiftherespondentisapublicentity)topayorbringadefence.Failuretodosowouldentitletheclaimanttorequestadefaultjudgmentfromthecourt,butinpracticethecourtsareflexiblewiththistimerequirement.Hearingswouldthenbeorganizedandevidencewouldbecross-examinedbeforeajudgmentisrendered.Inaddition,judgesmustgivethebeneficeofthedoubttodefendantswheretheevidenceisquestionable,sothatgoingtocourtwhentheclaimischallengedmaybeextremelyrisky.Courtstypicallyawardremediesintheformofdeclaratorydecisions(astoatitle,arightoralegalstatus),specificperformance,compensatorydamagesorinjunctions.Thecourtswouldneverawardpunitivedamages.
Necessary documentsThefollowingdocumentswouldbenecessary:Invoices,salescontract,purchaseorder,billoflading/airwaybill,anyemail/letterwhereindebtorhasacknowledgedthedebtorpromisedpayment.Furtherthesaiddocumentsarerequiredinoriginalatthetimeofinitiatinglegalactionorlatestatevidencestage.
Time limitationsCommercialclaimsmustbebroughtbeforeIndianCourtswithinthreeyears,startingfromtheinvoiceduedate.Thelimitationperiodmaybeextendedforanadditionalthreeyearsifthedebtoracknowledgesthedebtinwritingorpaysthedebtinpart.
Otherwise,thislimitationisconsideredamatterofsubstantivelawwhichthecourtshavenoauthoritytobypass.Beyondthisperiod,legalactionwillthereforenotbeadmitted.
Precautionary measuresPrecautionarymeasuresmayhelptopreservethedebtor’sinterestspendingafinaldecision.Indeed,thecourtsmayorderinterimmeasuresorinjunctionsaimingatprotectingassets(attachmentorders)orevidence(searchorders).Theclaimantmusthoweverdemonstratethatithasaprimafaciecase,thatthebalanceofconvenienceisinhisfavorandthatorderingsuchmeasureswouldpreventtheoccurrenceofirreparableharm.Same-dayordersmaybeobtainedinemergencysituationsifthecourtsagreetorenderexpartedecisions(inthedebtor’sabsence),buttheclaimantwouldbeaskedtoprovidesecurityoncostsinordertoprotecttherespondentfromirresponsibleaction.
Lodging an appealThedefeatedpartymaylodgeanappealbeforeaHighCourtagainstthedecision(decree)renderedinfirstinstance,withinthirtydaysofnotificationofthecourtdecision.Thecourtwouldthenreviewthejudgmenttakingquestionsoflawandfactintoaccount.DecisionsrenderedinsecondinstancemayalsobeappealedagainstbeforetheSupremeCourtwithinninetydays,butthelattermustgrantaleaveforappealtothiseffectandwillonlyconsiderquestionsoflawofgeneralimportance.DecreesandordersissuedinfirstinstancebyanyHighCourtmaybeappealedinthesamecourtwithinthirtydays.
Enforcing court decisionsEnforcementofdomesticjudgmentsmaycommenceonceajudgmentisfinal(i.e.isnoappealislodgedwithinninetydays).Ifthedebtorfailstosatisfythejudgment,itispossibletorequestthecourttocommendexecutionbywayofanattachmentandsaleofthedebtor’sassets.Actiontoobtainanenforcementordermaybebarredaftertwelveyears.
Collection @ Euler HermesItisalwaysadvisedtoattemptcollectionpriortoanylegalactioninordertomaximizechancesofsuccessfulrecoveryandavoidlegalcostsanddelays.Ourkeyprincipleistocollectincloseproximitytothedebtor,usingaseriesofletters,emailsandphonecallsinthelocaldebtorlanguage.OurWorldCollectionNetworkofEulerHermesofficesandExternalProvidersareexpertsinprofessionaltradedebtcollectionandnegotiation,ensuringpositiveoutcomeswhilstretainingimportantclientrelationships.EulerHermescanhandlethecompletecollectionsprocessfromamicable,pre-legalactionthroughtojudgmentandenforcement.
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How long could legal action take?ThedurationoflegalproceedingsinIndiawouldvary,dependingonthetypeoflegalproceedingsandthecourtsbeforewhichlegalactionisinitiated.Nonetheless,itwouldbefairlyreasonabletosaythatlegalactioncouldrequirethreetofouryearsonaverage.Difficultenforcementconditionsinthemostcomplexcasescoulddoublethisduration.ThecourtsinIndiadonotdifferentiatebetweendomesticandInternationallitigationproceedings,thereforenospecificdelaysoughttobeexpectedinthisregard.
How much could this cost?Thewinningpartymayobtainfromthecourtthatpartofthecostsdeemednecessarytodefendtheclaimbepaidbythedefeatedparty.Inpractice,thecourtshavehoweverimposedsignificantlimitationstothebenefitofthelatter.Significantcourtfeesmustbepaidwhilstinitiatingarecoverysuitagainstadebtor.ThefeesmayvaryimportantlyfromonStatetoanothersince,intheabsenceofuniformregulation,thesearenotalwayscapped.Thecostsofproceedingsotherwiseincludethelawyer’sfees,thefeesofprocessserver,thebailiff’sfees,publicationcostsandothermiscellaneousexpenses.Asfarasattorneyfeesareconcerned,conditionalarrangementsandcontingencyarrangementswherebylegalfeesarenotpaidupfrontbutratherconsistofapercentageoftheawardeddamages(i.e.‘no-win-no-fee’)areprohibitedbylaw.
Alternatives to legal action
Alternative Dispute Resolution methods (ADR)Giventhedifficultytoobtaincourtdecisionsthroughtheordinarylegalprocess,AlternativeDisputeResolutionmethodsmayproveveryeffective.TheArbitrationandConciliationAct1996isbasedontheUNCITRALModelLawonInternationalCommercialArbitrationof1985andwouldallowthepartiestosolvetheirdisputebyeitherreachingavoluntarycompromise(conciliation)orhavingthedisputedecidedbyaneutralthird-partywhosedecisionisbindingontheparties(arbitration).Theseproceedingsalsobringconfidentialitytothedisputesettlementproceedingsandmaythusconstituteaseriousmeansofprotectingtradeorcommercialsecrets.
Foreign forumsEventhoughrecognitionandenforcementmaybecomplicated(seebelow),foreigntradersmayalsoescapedomesticcourtsbysubjectingbusinessdisputestoaforeignforum(i.e.underaforeignlaworbeforeaforeigncourt).IndiancourtsindeedtendtorespectforeignjurisdictionclausesprovidedthatthereisnocontradictionwithIndianregulationsorpublicpolicy,andthataforeignlawdoesnotaimatescapingIndiantaxlaw.Ifaforeignlawistobeapplied,IndiancourtswouldnonethelessapplyIndianproceduralrulesaswellasIndianrulesofevidence.Itishoweveressentialthattheagreementbecharacterizedbyaninternationalconnection(forexample,onepartyhaselecteddomicileinanothercountry,ortheplaceofexecutionislocatedabroad),and
thatajurisdictionclauseisdraftedtothiseffectbyaspecialist.Asfarasarbitration,isconcerned,domesticproceedingsconductedundertheArbitrationandConciliationActwouldpreventthepartiesfromapplyingaforeignlawtothedispute.Foreignlawswouldhoweverbeapplicableininternationalarbitrationproceedings.
Enforcing foreign awardsIndiaisapartytotheHagueConventiononForeignJudgmentsinCivilandCommercialMatterssince2006butenforcingforeignawardsinthecountrymaybealengthy,costlyandhaphazardprocess.WhentheforeigndecisionwasissuedinacountrysignatorytoareciprocalenforcementagreementwithIndia,thedecisionisdeemedenforceablebyDistrictCourtsasifithadbeenissuedbyanIndiancourt(Section44AoftheCodeofCivilProceduresof1908).Thecourtwouldnonethelessverify,amongstotherdetails,whethertheissuingcourthadjurisdictiontodecidewiththeclaiminthefirstplaceandwhetherthedecisioniscompatiblewithIndianandinternationallaw.Whennoreciprocityagreementapplies,enforcementrequirescommencinganewlegalactionbeforetheDistrictCourtofthedefendant’slocation(Section13CPC),whichwouldalsoverifythesepoints.IndiaisasignatorytotheNewYorkConventionontheRecognitionandEnforcementofForeignArbitralAwardsof1958,thereforeitsdomesticcourtsoughttorecognizeandenforceawardsrenderedthroughinternationalarbitrationproceedings.
Litigation @ Euler HermesShouldlegalactionbenecessaryEulerHermescanprovidesupportthroughoutthelegalprocessfromjudgmenttoenforcementviaourWorldCollectionNetworkofEulerHermesofficesandExternalProviders.Legalactioncanbeoftenbecomplicatedandexpensive,youwillbeinformedofallcostspriortoanyactionandadvisedonwhichrouteisbesttotake.
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Handling insolvent debtors
Adebtorisdeemedinsolventifitisunlikelytomakeitsnetworthexceedtheaccumulatedlosseswhilstmeetingitsfinancialobligationswithinareasonableperiodoftime.Inaddition,acompanyisdeemed‘sick’whenlossesoverseveralyearshavereducedsignificantlyitsaveragenetvalueorwhenithasfailedtorepaydebtsonaregularbasis.UpuntilMay2015,theinsolvencyframeworkinIndiawasmadeupofseveralbodiesoflawswhoseoverlappingprovisionswereappliedbyconflictingpublicauthorities.Thus,itwasextremelydifficulttoseethroughthesystem.Havingsaidthis,itshouldbeemphasizedthatvariouseffortshavebeenmadetodevelopacompanyrescuecultureinsofarastheCompaniesActof1956andtheSickIndustrialCompaniesActof1985(SICA)bothprovideforsharecapitalandfinancialreorganizationmechanisms.TheCompaniesActof2013wasrecentlyenactedandoughttoreplacetheCompaniesActof1956.Inafurtherprogression,veryrecentlythenewbankruptcyandinsolvencybillwaspassedandwillbetheonlycodeforthebankruptcyandinsolvencyproceedings,andwillsimplifythepreviousoverlappingprovisioninvariousbodies.Thiswillleadtoinsolvenciesandbankruptcyproceedingsbeingconcludedin6months(butcanbeextendedfor3months).However,itisnotimplementedyet.Forthis,therequiredauthoritybodies,mechanismandprofessionalexpertiseareyettobeputinplace,soitseffectsshallberelfectedinthecoming2-3years.Inaddition,theSecuritisationandReconstructionofFinancialAssetsandEnforcementofSecurityInterestActof2002(SARFAESI)dealswithassetsheldbybanksandfinancialinstitutions.CompaniesmayfinallyrestructuretheirdebtundertheCorporateDebtRestructuringSchemeundertheauspicesoftheReserveBankofIndia(RBI).Thelawimposesnodebtwrite-offlimitation.
Insolvency proceedingsOut-of-Court proceedingsOut-of-courtsettlementmaybeconsideredastheCodeofCivilProcedureandallowspartiestosettlethematterprovidedthatajudgepassesaconsentdecree.
Restructuring the debtReorganizationmaybeconductedthroughtwodistinctmechanismswhichmaybedescribedasfollows.First,theCompaniesActof1956entitlesbothadebtoranditscreditorstosubmitareorganizationschemetotheHighCourt,whichthenorganizesameetingofcreditors.Ifthedebtor’sproposalisvalidatedby50%ofthepresentcreditorsowingthree-quartersoftheclaim,thecourtmaydecidetoapproveit.Inthiscase,thedebtortogetherwiththeabsentanddissentingcreditorsareboundbytheapprovedschemebutaCommitteeofCreditorsmaybesetuptoassisttheliquidatorinensuringthattheschemeisrespected.TheHighCourtmayalternativelyorderthewindingupofthedebtorcompany.Second,SICAhascreatedanobligationforthedirectorsofaninsolventcompanytofileforinsolvencywiththeBoardforIndustrialandFinancial
Reconstruction(BIFR),withinsixtydaysofthecompanybeingunabletopayitsdebts.ThecompanydirectorsmaycontinuebusinesswhilsttheBIFRassessesthesituationwiththevariousstakeholders(whichcannotactasaCommittee).Theboardisthenresponsiblefordecidingwhetherthedebtorcompanyisviable(andshouldberestructured)orwhetheritshouldbeconsideredinsolvent(andbewoundup).BoththeHighCourtandtheBIFRmayorderamoratoriumtoprotectdebtorsfromcreditorsduringthereorganizationphase.
Winding up proceedingsLiquidation(windingup)proceedingsmayotherwisebeinitiatedupondemandofeitherthedebtororthecreditor,onthegroundthatthedebtorisunabletopayitsdebts.Priortoinitiatingwindingupproceedings,awindingupnoticemustfirstbeissuedtogivethedebtoramoratoriumperiodtomakethepayment.Furtherproceedingswouldotherwisebeinitiatedbefore
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Insolvency @ Euler HermesEulerHermesworkcloselywithdebtors,creditorsandlawyerstoprovidesupportduringinsolvencyandrestructuringprocesses.Withmanyoptionsavailablewhenitcomestoinsolvencyactionwecanofferadviceonwhichoptionissuitable.
theHighCourtofthestatewheretheregisteredofficeaddressofthedebtorislocated.WiththenewbankruptcyandinsolvencybilltheseproceedingswouldtakeplacebeforeanAdjucatingAuthority(CompanylawboardorDebtrecoverytribunal).Aliquidatorisappointedandimposesaspecifictimeperiodduringwhichthecreditorsmustfiletheirclaims,andestablishesalistofprioritydebts.Theliquidatorisresponsibleforsellingthedebtor’sassetanddistributestheproceedstothevariouscreditors.Amoratoriumdurationforvariousstepsisputinplaceduringtheproceedingsinordertoprotectthecompanyfromparallelenforcementactions.Arestructuring/paymentresolutionproposal(ifany)hastobeagreedby75%ofthecreditors.Itshouldbenotedthat,inpractice,windingupproceedingsareconsideredtobemoreeffectivethandebtrestructurationmechanismsintermsofrecoverybecausethedebtorsgenerallyseekanOut-of-Courtsettlementofthedebtinordertoavoidliquidation.
Priority rulesPriorityrulesnormallyapplywhilstdistributingtheproceedstothecreditors.Thesearecomplexandvarydependingonthelegalframeworkconsidered.UndertheCompaniesActof1956,freshcashprovidedtothedebtorduringinsolvencyproceedingsisnotgivenparticularpriorityoverotherdebts,howevertheclaimsofsecuredcreditorsandemployeesaswellasstatutoryliabilitiessuchastaxauthoritiesdohavepriority.SICASanctionedSchemesarealternativelypreparedbyeitherthesickcompanyorthroughanoperatingagencyappointedbyBIFR(BoardforIndustrialandFinancialReconstructions).DistributionwouldthenbemadeinaccordancewiththeprovisionsoftheBIFR-sanctionedagreement.Inthenewbankruptcyandinsolvencycode,higherpriorityisgiventotheduestowardsworkmen’scompensatinandsecuredcreditors,followedbyunsecuredandgovernmentdues.
Cancellation of suspect transactions (clawback)Receiversinreorganizationandliquidationproceedingsarebothentitledtoreviewandapplyforcancellationofanysuspecttransactionconductedbythedebtorduringasuspectperiodrangingfromthreemonthstofiveyearspriortothebeginningoftheinsolvencyproceedings.Typically,transactionsfavoringonecreditorovertheothersorreducingtheestate’svalue(etc.)couldthusbevoid.
How long could insolvency proceedings take?Theinsolvencyproceedingsvarydependingontheapplicableprovisionsandchoceoflegalrecourse.Generally,insolvenciesareconcludedin3-5years,butitmaytakeevenlongerdependingonthecasetocasecomplexitites.Withtheenactmentofthenewbankruptcyandinsolvencycode,thetotaldurationfortheconcludinginsolvencyproceedingswillbe180day,whichmaybeextendedfor90moredays.
Necessary documentsInvoices,salescontract,purchaseorder,billoflading/airwaybill,anyemail/letterwhereindebtorhasacknowledgedthedebtorpromisedpayment.Furtherthecopyofsaiddocumentsareacceptable,butoriginalmayberequiredinsomecases.
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