My company in New Delhi 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, 2016 (IBC) if your company in New Delhi is unable to pay its debts.

The IBC provides a legal framework for insolvency resolution and liquidation for companies and individuals in India. Here are the key points regarding the process of filing for insolvency:

• Eligibility Criteria:
  • The company must be registered under the Companies Act, 2013.
  • The company must have defaulted on its debt obligations, meaning it has failed to make the payment on the due date.
  • Minimum default amount should be ₹1,00,000 as per Section 4 of the IBC.
• Filing Application:
  • File an application before the National Company Law Tribunal (NCLT) under Section 7 of the IBC.
  • The application must include information about the company, the nature of its default, and details of the creditors.
  • It should be supported by documents such as the company’s financial statements and proof of default.
• Admission of Application:
  • The NCLT will review the application and decide whether to admit it within 14 days of filing.
  • If admitted, a moratorium will be declared, preventing creditors from taking any action against the company.
• Appointment of Resolution Professional:
  • The NCLT appoints an Insolvency Resolution Professional (IRP) who will manage the affairs of the company during the resolution process.
  • The IRP will take control of the company’s assets and liabilities and will call for a meeting of the creditors.
• Resolution Plan:
  • Creditors will discuss and vote on a resolution plan proposed by the IRP or other interested parties.
  • A resolution plan must be approved by a majority of the creditors representing 66% of the total debt.
• Liquidation:
  • If a resolution plan is not approved within 180 days (extendable to 270 days), the company may be liquidated as per Section 33 of the IBC.

Filing for insolvency can be complex, and it is advisable to consult with a lawyer specializing in insolvency law to navigate the process effectively.