How to be Prepared Resolution Plan under Insolvency Law

How to be prepared Resolution Plan under Insolvency Law  

A Model Resolution Plan. The plan is not a legislative or regulatory document and was created based on research into other approved resolution plans. The plan is not based on any provision or regulation under the code and may only be used as a guide while preparing a plan. Any action taken based on this plan is not under the control of Rajput Jain and Associates. Please refer to the code’s provisions and its regulations when creating your resolution plan.

• A resolution applicant must provide the resolution professional with a resolution plan that was created using the information memorandum. enables the payment of the costs of the insolvency resolution procedure in accordance with the Board’s specified order, with the payment of all other corporate debtor debts receiving precedence.
• After its assessment, the resolution professional will submit the resolution plan for approval to the committee of creditors.
• A vote of at least 66% of the financial creditors with voting rights must agree to the resolution plan in order for it to be approved by the committee of creditors.
• A resolution applicant may submit a resolution plan 1 along with an affidavit declaring that he is qualified under section 29A] to the resolution professional created in accordance with the information memorandum.
• Priority in payment over financial creditors is given to the sum owed to operational creditors under a resolution plan.
• A resolution plan must include a description of how it addressed the interests of all parties, including the corporate debtor’s operational and financial creditors.
• A vote of at minimum 66% of the financial creditors with voting rights must approve to the resolution plan in order for it to be accepted by the committee of creditors.
• Even an appeal against a resolution plan that has been accepted, as described by section 61(3) of the Code, may be reviewed by the appellate authority.

In consideration of ‘Practical Aspects of Insolvency Law we are giving the sample Resolution Plan format.  This resolution plan has not been prepared as a statutory or regulatory document and has been based on an analysis of other approved resolution plans. this plan is not based on any provision or regulation under the code and may only be used as a reference while preparing a plan. icsi iip assumes no responsibility for any actions taken in reliance upon this plan. for the preparation of your resolution plan, please refer to the provisions of the code and its regulations.

SAMPLE RESOLUTION PLAN

MODEL RESOLUTION PLAN

PRIVILEGED AND CONFIDENTIAL

            (DATE)

RESOLUTION PLAN FOR

                                                (NAME OF THE CORPORATE DEBTOR)

CIN:                                                            

(Pursuant to Insolvency and Bankruptcy Code, 2016

BY RESOLUTION APPLICANT

                                                               (NAME)

Submitted to:

                        (Name) Resolution Professional IBBI registration No:

MODEL RESOLUTION PLAN TABLE OF CONTENTS

S. No.	PARTICULARS
I.	Definitions and interpretations
II.	Overview of the corporate debtor and corporate insolvency resolution process 2.1               General information about the company 2.2               Details about past performance of the Company 2.3               Brief background of CORPORATE INSOLVENCY RESOLUTION PROCESS and time lines 2.4               Details of   litigations   by   or   against   the Company
III.	PROJECT BACKGROUND AND PRIME REASONS OF INSOLVENCY 3.1               Brief details about the Project 3.2               Manufacturing facilities and infrastructure available with the Company 3.3               Manpower and employee strength of the Company 3.4               Estimated reasons for insolvency of the Company
IV.	OVERVIEW OF THE RESOLUTION APPLICANT
V.	DETAILS OF THE RESOLUTION PLAN Cut-off date Effective date Assumptions 5.1               Resolution Strategy 5.2               Proposed Governance Structure 5.3               Cost of resolution plan and means of finance 5.4               Specific procedure for payment of dues of all the creditors 5.5               Proposal        for        capital       and financial restructuring 5.6               Proposal for operating restructuring 5.7               Financial projections 5.8               Tax implications 5.9               Details of parties that will infuse capital 5.10           Availment of credit facilities 5.11           Term       of       resolution       plan and          its implementations 5.12           proposal relating to adequate means for supervising its implementation 5.13           Strategy to deal with transactions covered U/s 45, 50, 66 etc. 5.14           Turnaround the business: Strategies 5.15           Standing of bidder resolution applicant 5.16           Details of dealing with the interest of all the stakeholders

 

	5.17           Details           whether           the bidder resolution applicant/related parties have failed to implement the resolution plan earlier. 5.18           Recovery indicators
VI.	Eligibility details in relation of resolution applicant and connected persons
VII.	Details as per Regulation 38 of Insolvency & Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016
VIII.	Eligibility norms as proposed in the evaluation matrix
IX.	Approvals/waivers/ specific orders by/from NCLT
X.	Indicative timeline of events for implementation of proposed resolution
XI.	Performance security
XII.	other terms and conditions

I. DEFINITIONS AND INTERPRETATIONS

(All the definitions and interpretations can be covered here)

II. OVERVIEW OF THE CORPORATE DEBTOR AND CORPORATE INSOLVENCY RESOLUTION PROCESS

This resolution plan is submitted by the resolution applicant pursuant to the Code, for the corporate insolvency resolution of the Company.

The corporate insolvency process involving the Company was initiated pursuant to a petition

under Section      of the Code filed by               Ltd. as one of the              creditors for initiation

of the Corporate Insolvency Resolution process (CORPORATE INSOLVENCY RESOLUTION PROCESS) against the Company which was admitted by the Hon’ble National Law Tribunal (Adjudicating Authority),          Bench vide its order dated   .

The adjudicating Authority appointed                       , Insolvency professional, Registration Number:                       as the interim resolution professional and subsequently appointed and confirmed as the Resolution professional in the first meeting of Committee of Creditors held on                                     .

The Resolution professional made available the Information memorandum to the Resolution applicant.

• General information about the company:

S.NO	ITEM		PARTICULARS
1.	Name of the Company
2.	Registered      Office      of Company	the
3.	Date of incorporation
4.	Website
5.	Date of initiation of CORPORATE INSOLVENCY RESOLUTION PROCESS
6.	Name and contact details of ResolutionProfessional
7.	Date      of      submission Resolution           Plan Resolution Professional	of to
8.	Directors
9.	Shareholding (Authorized/Paid up/top 5 shareholders)
10.	Industry Segment
11.	Business     Activity     of Company	the

• Details about past performance of the Company:

Summarised performance of the Corporate Debtor in the last 3 financial years (including the balance sheet, profit & loss account, cash flow statement) Any remarks by the resolution applicant:

• Brief background of CORPORATE INSOLVENCY RESOLUTION PROCESS and timelines

Details of application filed with National Company Law Tribunal for insolvency resolution process, details of creditors and amount of credit therein etc

• Details of litigations (prior to commencement of IBC) by or against the Corporate Debtor with respect to payment of debts

Details of all the litigations may be covered here.

III. PROJECT BACKGROUND AND PRIME REASONS OF INSOLVENCY

S.NO	ITEM	PARTICULARS
3.1	Brief details about the project
3.2	Manufacturing      facilities      and Infrastructure    available     with the Company
3.3	Manpower        and        employee strength of the Company
3.4	Estimated           reasons            for insolvency of the Company

1. INFORMATION ABOUT THE RESOLUTION APPLICANT

S.NO	ITEM				PARTICULARS
1.	Name of Applicant	the	resolution
2.	Constitutionof      the resolution Applicant
3.	Address for correspondence of the Resolution Applicant
4.	PAN
5.	Email Id
6.	Phone No
7.	Date of incorporation
8.	Name of Directors& KMPs
9.	Name of the person (s) who is authorized by the company to submit Resolution Plan and their designation, contact no.
10.	Shareholding        (Authorized/Paid up/top 5 shareholders)
11.	Details	of	subsidiaries	and

 

	associate companies
12.	Main          activities        and Products
13.	List     of     major     customers     and suppliers
14.	Details         of          manufacturing facilities (Location etc)
15.	Past performance and financials as per      last       threeyears      Audited Financials	Annexure- …..
16.	Relationship       if       any       with Corporate Borrower

 

V. DETAILS OF THE RESOLUTION PLAN

On the basis of information memorandum, documents available in the public domain and additional information provided by the resolution professional,

I/we hereby submit the following resolution plan:

The Resolution plan, as detailed in the following table envisages the following:

• “Cut-off date” for the purpose of determining the liability to be settled under the proposed resolution plan has been considered as , which is also the Insolvency Commencement
• “Effective date” for the purpose of implementation of this plan means the date on which the resolution plan is approved by the Adjudicating
• Assumptions: Key assumptions used for preparation of resolution plan may be indicated.

S.NO	ITEM	PARTICULARS
5.1.	Main strategy proposed in the Resolution Plan (Strategy may include takeover, merger, sale of assets etc)   Proposed Operation plan may be specified, Changes in technology, product mix etc. may be provided.	Annexure- …..
5.2	Proposed Governance Structure including Board of directors, key management, Promoters and members   Adequacy regarding licences, permissions, manpower etc. to operate at projected level may	Annexure- …..

 

	also be specified
5.3	Cost of Resolution Plan and Means of Finance   Sources of funds that will be used to pay cost of CORPORATE INSOLVENCY RESOLUTION PROCESS, dues to operational creditors& dissenting financial creditors as per provisions of section 30(2)(b) of the code, may be provided.	Annexure- …..
5.4	Specify procedure for payment of dues towards resolution process costs/ financial creditors/ operational creditors/ government dues/disputed claims/dissenting financial creditors etc. along with the details of payment made in relation to actual debts including the sources of funds that will be used to pay the dues.     (With reference & confirmation that amount due to the operational creditors under a resolution plan shall be given priority in payment over financial creditors.)	Annexure- …..
5.5	Proposal for capital and Financial Restructuring a)       Details of the creditors along with details of such debt and amount of debt. b)      The structure and method of payment to each of the creditor. c)       Transfer of shares/merger, amalgamation, delisting or other corporate restructuring plans d)      Details                                             on satisfaction/modification of security interest e)       Sale/disposal of assets, if any	Annexure- …..

 

5.6	Proposal for operating restructuring a)       The operating restructuring/turnaround strategy that may be adopted by the Company (changes in technology etc.). b)      The benefits of adoption of such strategy to various stakeholders	Annexure- …..
5.7	Financial Projections   (Reasonableness of Financial Projections i.e. Sales, EBITDA, EBIT etc./Certainty/Likelihood/Feasibilit y/Eventuality of honoring proposed commitments may be provided)	Annexure- …..
5.8	If resolution plan has any Tax implication, the same may be indicated
5.9	Details of parties that will infuse the capital a)    Details of the amount of capital infused b)   Time period within which capital will be raised c)  Source of such capital infusion d)  Utilization of such capital	Annexure- …..
5.10	Availment of credit facilities   a)       Improving operations b)      Capital Expenditure c)       Working Capital facilities d)      Any other purpose, shall be clearly specified along with timelines for such infusion	Annexure- …..
5.11	Term of the resolution plan and its implementation schedule	Annexure- …..
5.12	Proposal relating to adequate means for supervising its implementation	Annexure- …..
5.13	Stratergy to deal with transactions covered U/s 43, Section 45, Section 50, Section 66 etc.	Annexure- …..
5.14	Ability of Resolution Applicant to turnaround distressed companies; a)      Turnaround strategy b)      Managerial competence and technical abilities c)       track record in implementing turnaround of stressed assets d)      Technology advancement/	Annexure- …..

 

	Reduction cost
5.15	Standing      of       Resolution Applicant a)       experience in sector b)      external rating c)       adherence to financial discipline d)      record of regulatory compliance e)       whether NPA, including Group Companies, <12 months f)        Others	Annexure- …..
5.16	Details of dealing with the interest of all stakeholders, including financial creditors and operational creditors, of the Corporate Debtor.
5.17	Details whether a resolution Applicant or any of its related parties has failed to implement or contributed to the failure of implementation of any other resolution plan approved by the Adjudicating Authority at any time in the past.
5.18	Recovery Indicators Specify recovery indicators of resolution plan, assessment techniques and mile stones

VI. ELIGIBILITY DETAILS IN RELATION OF RESOLUTION    APPLICANT AND CONNECTED PERSONS ARE PROVIDED BELOW:

SECTION	ITEM	PARTICULARS
29(A)(a)	is an undischarged insolvent
29(A)(b)	is a willful defaulter in accordance with the guidelines of the Reserve Bank of India issued under the Banking Regulation Act, 1949
29(A)(c)	at the time of submission of the resolution plan has an account, or an account of a corporate debtor under the management or control of such person or of whom such person is a promoter, classified as non-performing asset in accordance with the guidelines of the Reserve Bank of India issued under the Banking Regulation Act, 1949 or the guidelines of a financial sector regulator issued under any other law for the time being in force, and at least a period of one year has lapsed from the date of such classification till the date of commencement of the corporate insolvency resolution process of the corporate debtor:

29(A)(d)  : Provided that the person shall be eligible to submit a resolution plan if such person makes payment of all overdue amounts with interest thereon and charges relating to nonperforming asset accounts before submission of resolution plan:

Provided further that nothing in this clause shall apply to a resolution applicant where such applicant is a financial entity and is not a related party to the corporate debtor. has been convicted for any offence punishable with imprisonment:

• for two years or more under any act specified under the Twelfth Schedule; or
• for seven years or more under any other law for the time being in force.

29(A)(e)

Provided that this clause shall not apply to a person after the expiry of a period of two years from the date of his release from imprisonment:

29(A)(f)

Provided further that this clause shall not apply in relation to a connected person referred to in clause(iii) of Explanation I is disqualified to act as a director under the Companies Act, 2013

29(A)(g)

is prohibited by the Securities and Exchange Board of India from trading in securities or accessing the securities markets;

has been a promoter or in the management or control of a corporate debtor in which a preferential transaction, undervalued transaction, extortionate credit transaction or fraudulent transaction has taken place and in respect of which an order has been made by the Adjudicating Authority under this Code.

Provided that this clause shall not apply if a preferential transaction, undervalued transaction, extortionate credit transaction or fraudulent transaction has taken place prior to the acquisition of the corporate debtor by the resolution applicant pursuant to a resolution plan approved under this Code or pursuant to a scheme or plan approved by a financial sector regulator or a court, and such resolution applicant has not otherwise contributed to the preferential transaction, undervalued transaction, extortionate credit transaction or fraudulent transaction

29(A)(h)

has executed a guarantee in favour of a creditor in respect of a corporate debtor against which an application for insolvency resolution made by such creditor has been admitted under this Code and such guarantee has been invoked by the creditor and remains unpaid in full or part

29(A)(i)	is subject to any disability, corresponding to clauses (a) to (h), under any law in a jurisdiction outside India; or
29(A)(j)	has a connected person not eligible under clauses (a) to (i)

“Connected persons” means-

1. Persons who are promoters or in the management or control of the resolution applicant;
2. The Persons who will be promoters or in management or control of the business of Company during the implementation of the Resolution Plan;
3. Holding company, subsidiary company, associate company and related party of the persons referred to it in terms (a) and (b).

An Affidavit in this connection is enclosed as Annexure-

VII. DETAILS AS PER REGULATION 38 OF INSOLVENCY & BANKRUPTCY BOARD OF INDIA (INSOLVENCY RESOLUTION PROCESS FOR CORPORATE PERSONS) REGULATIONS, 2016:

S.NO.	ITEM	REFERENCES
a)	it addresses the cause of default
b)	it is feasible and viable
c)	it has provisions for its effective implementation
d)	it has provisions for approvals required and the timeline for the same
e)	the     resolution    applicant    has    the capability to implement the resolution plan

 ELIGIBILITY NORMS AS PROPOSED IN THE EVALUATION MATRIX

S.NO.	ITEM	PARTICULARS
1.	Condition No. 1	Reference/ proof of complying
2.	Condition No. 1	Reference/ proof of complying

IX. APPROVALS/WAIVERS/ SPECIFIC ORDERS BY/FROM NCLT

The resolution applicant seeks for the following approvals/waivers/specific orders from the Hon’ble NCLT:

1. Request approval from NCLT for:
2. Request waiver of liabilities from NCLT for:
3. Request waiver of liabilities from NCLT for:

X. INDICATIVE      TIMELINE      OF      EVENTS      FOR  IMPLEMENTATION OF PROPOSED RESOLUTION PLAN:

Key action points of resolution plan along with implementation schedule and milestones may be highlighted in the resolution plan. 

XI. PERFORMANCE SECURITY :

“Performance Security” means security of such nature, value, duration and source, as may be specified in the request for resolution plans with the approval of the committee, having regard to the nature of resolution plan and business of the corporate debtor.

The resolution applicant is required to provide a performance security within the time specified therein in case its resolution plan is approved and such performance security shall stand forfeited if the resolution applicant fails to implement or contributes to the failure of implementation of that plan in accordance with the terms of the plan and its implementation schedule.

Accordingly the resolution plan should specify a performance security as specified with approval of Committee of Creditors, time period within which it shall be provided.

XII. OTHER TERMS AND CONDITIONS

Governing Law

The Company and the new management shall abide and be governed by the laws of India giving effect to Adjudicating Authority order approving the resolution plan and any agreements, documents and instruments executed in connection with the resolution plan.

Binding effect

This resolution plan once approved by the Committee of Creditors and then by the Adjudicating Authority, along with such conditions as may be stipulated by the Adjudicating Authority, shall be binding on the Company, all holders of claims, creditors, members, promoter and all other parties in interest and each of their respective successors and assigns in accordance with Section 31(1) and 238 of the Code. The resolution plan does not contravene any of the provisions of the law for the time being in force. All requisite approvals and requirements of law required to give effect to the resolution plan shall be undertaken by the resolution applicant.

Severability and right to modify

In the event it is determined that any provisions of the resolution plan is unenforceable either on its face or as applied to any claims or transactions and/or in the event any provision of the resolution plan becomes invalid for reasons other than by breach of any party, the new management of the Company may apply to

Adjudicating Authority for appropriate modifications of such provisions of the resolution plan, to satisfaction of the Adjudicating Authority, and such invalidity and/or unenforceability of the provision of the resolution plan shall not render the whole resolution plan ineffective, unless otherwise directed by the Adjudicating Authority by order.

In case any such modification is required in the resolution plan after the receipt of Adjudicating authority approval, to comply with any laws currently in force or to apply for certain approvals as required under the resolution plan or for any requirements, not jeopardizing the rights of the creditors under the current plan, the new management of the company can do so only after approval of NCLAT.

Assignment of Interest

Any creditor may assign its rights under this resolution plan, subject to the transferee unconditionally agreeing to the bound by the terms of this resolution plan.

Consequences of revocation

In the event the resolution plan fails, the existing facilities of the creditors, the rights and remedies of the creditors under their respective existing financing documents including all securities and guarantees shall continue as if they had not been waived, amended, modified, released, superseded or replaced by the resolution plan and the creditors shall be entitled to enforce such rights and remedies under the existing financing documents, as if the same had not been waived and/or modified pursuant to this resolution plan and the other relevant documents executed thereof. In the event of failure of resolution plan any amount paid to the financial creditor will be adjusted towards the outstanding dues of the company. Provided; however, that the obligations of the company under the resolution plan shall continue to be binding on the Company and its co-obligators and the creditors shall be entitled to exercise all the rights and remedies conferred on them pursuant to this resolution plan.

DECLARATION

We hereby declare that we have read and understood all the terms and conditions relating to the formulation of resolution plan and hereby express our interest in the submission of resolution plan for the said Company. We further declare that the resolution plan is not in contravention of provisions of the Applicable Law and conforms to other requirements as may be specified by the Insolvency and Bankruptcy Board of India.

We also hereby declare that any confidential information of the Company that has come to our knowledge or might come to our knowledge during the insolvency resolution process shall not be divulged by us.

We hereby agree to invest the funds as proposed in the Resolution Plan. We understand that the Resolution Professional and/or the Committee of Creditors have further right to renegotiate the terms of this Resolution Plan & the decision of the Resolution Professional and/or the CoC’s in selection of the Successful Resolution Applicant shall be final and binding on us. We acknowledge that the Resolution Plan submitted is irrevocable and once the Resolution Plan is received and accepted, it shall not be transferable/ assignable.

We undertake to provide the Resolution Professional, the CoC’s and the Committee of Creditor’s Advisor with any further information as may be requested by them.

In case any of the provisions of this resolution plan are in contradiction to the Request for Resolution Plan (Process Memorandum) & Evaluation Matrix issued by the Resolution Professional, then the terms of this resolution plan shall prevail.

Yours faithfully

…………. (Name of the applicant) Place

Date

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