My company in Amravati cannot pay its debts; can I file for insolvency under IBC?

Detailed Legal Analysis

Yes, you can file for insolvency under the Insolvency and Bankruptcy Code (IBC) of 2016 if your company in Amravati cannot pay its debts.

The IBC provides a structured framework for resolving insolvency and bankruptcy issues for companies and individuals. Here are the key steps and requirements for initiating the insolvency process:

• Eligibility to File: Under Section 7 of the IBC, a financial creditor, an operational creditor, or the corporate debtor itself can initiate insolvency proceedings. As a company, you can file for insolvency if you meet the following criteria:
  • Your company must be unable to pay its debts, which is determined if a default occurs in payment.
  • Minimum default amount: The amount of default must be at least ₹1 lakh.
• Filing Application: The insolvency process is initiated by filing an application with the National Company Law Tribunal (NCLT) under Section 7 (for financial creditors) or Section 9 (for operational creditors). The application must include:
  • The name and address of the company.
  • Details of the debt, including the amount and the nature of the default.
  • Proof of the default, such as invoices, bank statements, or other relevant documents.
• Adjudication by NCLT: Upon receiving the application, the NCLT will verify the application:
  • If the application is complete and meets legal requirements, NCLT will admit the application within 14 days of filing.
  • If admitted, a moratorium period will be declared, preventing creditors from taking further action against the company.
• Appointment of Insolvency Professional: Once the application is admitted, an Insolvency Professional is appointed to manage the affairs of the company during the resolution process.
• Resolution Process: The company will undergo a resolution process for a maximum period of 180 days (extendable up to 330 days). During this period:
  • The insolvency professional will attempt to find a resolution plan that is acceptable to the creditors.
  • If a resolution is not achieved, the company may be liquidated under Section 33.

In conclusion, if your company is facing insolvency, it is crucial to act promptly and follow the procedures outlined in the IBC to seek relief and resolution.