Companies undergoing corporate insolvency resolution process tend to be in dire need of funds to meet their working capitalexpenses. Interim finance can be an important tool for effective reorganization so as to prevent liquidation
The Insolvency and Bankruptcy Code, 2016 (“Code”) creates several opportunities for lenders looking to invest in distressed assets. One such area pertains to the provision of ‘interim finance’. Interim finance essentially refers to short-term loans required to keep a company under the corporate insolvency resolution process running as a going concern. The Code defines interim finance to mean any financial debt raised by an interim resolution professional (“IRP”)/resolution professional (“RP”) during the corporate insolvency resolution process.
The Code allows an IRP/RP to raise interim finance in order to protect and preserve the value of the property of a corporate debtor and to manage its operations as a going concern. An IRP as well as an RP have unfettered rights to raise interim finance provided that - (a) the finance raised is below the monetary threshold set by the Committee of Creditors (“CoC”), if any; and (b) the conditions mentioned in point no. 2 below are met.
In the Code, the term ‘insolvency resolution process cost’ includes any interim finance raised for a corporate debtor along with the cost of raising such interim finance. The payment towards such costs gets the highest priority in a resolution plan or during liquidation and is paid out prior to any recoveries being made by any creditor. This payment includes interim finance, including principal and interest, which also gets this priority. However, since interim finance forms part of such costs, its payment is pari passu to other such costs like fees due to an RP. Similarly, during liquidation, the distribution waterfall provides for the highest priority to be given to insolvency resolution process costs, which need to be paid out of the liquidation estate.
هذه القصة مأخوذة من طبعة February 2018 من Legal Era.
ابدأ النسخة التجريبية المجانية من Magzter GOLD لمدة 7 أيام للوصول إلى آلاف القصص المتميزة المنسقة وأكثر من 9,000 مجلة وصحيفة.
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هذه القصة مأخوذة من طبعة February 2018 من Legal Era.
ابدأ النسخة التجريبية المجانية من Magzter GOLD لمدة 7 أيام للوصول إلى آلاف القصص المتميزة المنسقة وأكثر من 9,000 مجلة وصحيفة.
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