Insolvency Services - All You Need To Know

Insolvency Services - All You Need To Know

June 10, 2022 Admin
Insolvency ServicesInsolvency Services in India

Understanding Insolvency

Insolvency is a state of financial distress where an individual or business can no longer pay its debts on time. A company that has taken large loans may face insolvency when it is unable to pay those loans as business slows down or profits dwindle. Insolvency is of two kinds, cash-flow and balance-sheet insolvency, and can happen in either of the two ways or both at once:


  • Cash-flow insolvency, which is considered easier to resolve, refers to a situation where the business does not have accessible cash to pay off the debts but does have illiquid assets.
  • Balance-sheet insolvency occurs when your total liabilities are greater than your total assets, whether liquid or illiquid. The standard procedure in such cases is to immediately stop business operations since insolvency law prohibits you from paying some creditors but not others, classed as “trading while insolvent”.


The factors that cause insolvency often include poor cash management, an increase in expenses, miscalculated revenue projections, unexpected costs like lawsuits, or an inability to adapt to a dynamic marketplace. Legal action, including the liquidation of assets, can be taken against the insolvent entity, with bankruptcy being the last resort to pay off the debts.


Stable businesses can reach the brink of insolvency in an alarmingly short time. It is, therefore, crucial to keep an eye out for warning signs, adopt business structures that leave you less exposed, and opt for professional help like insolvency services that can help you prevent it, and even lift your business out of insolvency.


Insolvency Services: What They Do

Expert guidance and assistance as soon as you identify the threat of insolvency can help you keep your business afloat and avoid further loss or lawsuits. Insolvency services provide the needed counsel, and in reasonable cases can also help turn the tides for your company.


Insolvency services can help you assemble a plan to reduce company overheads, assist in garnering financial support, create a revival plan, and aid you in insolvency proceedings. They offer advice on the procedure for corporate insolvency services, regulatory advice on the Insolvency and Bankruptcy Code, 2016 (IBC 2016), Restructuring Advice for your business, and advice on the different types of insolvency.


Insolvency Services - All You Need To Know


Insolvency services from reputable organisations include the following in their package:


  • Distressed Assets Funding (Interim Finance, Acquisition Funding, One Time Settlement (OTS) Funding, etc.)
  • Corporate Restructuring (Internal and External Re-organization)
  • Resolution Plan (Preparation and Vetting of Resolution Plan or Revival Plan (Pre NCLT and during NCLT)
  • Transaction & Audit Services
  • Valuation Services
  • Process Advisory Services
  • Turnaround Management


When Your Business Becomes Insolvent: What Happens Next

Creditors (financial or operational) can apply to the National Company Law Tribunal for insolvency proceedings in case a company fails to pay its debts to suppliers and creditors. The creditor can then issue a demand notice, after which the Committee of Creditors is formed. A resolution professional must be appointed within seven days of the formation of CoC, who will also help the company devise a resolution plan.


A company can face liquidation if the corporate insolvency resolution plan is not decided upon, or the resolution plan is rejected by the Committee of Creditors or the NCLT.

The debts are then paid in a set order of priority, and lastly, the order for the corporate debtor's dissolution is carried out.


Reaching the verge of insolvency, however, does not have to translate into the end of your venture. Hiring a reliable insolvency service provider can help you trudge these rough waters successfully.


How Can Insolvency Services Help Your Business

An Insolvency Service provider can help execute complex debt and equity transactions involving investors, special situation funds, NBFCs, etc. for the financially distressed entity, and can advise stakeholders on interim finance, acquisition finance, and navigating bankruptcy.


Acting on behalf of the debtor, it can offer competent leadership in a difficult situation to resolve the outcome. It can undertake restructuring assignments for the business, and provide a detailed rundown on risk analysis and associated financial viability. It also provides Process Advisory services under IBC 2016:


  • Preparation of Evaluation Matrix during CIRP under IBC, 2016
  • Identification of the right ensembleof Resolution Applicants during CIRP under IBC 2016
  • Preparation and Vetting of Resolution Plans of Resolution Applicants during CIRP under IBC 2016


Best Insolvency Services in India

One of the most reputed Insolvency Services in India is Resurgent Resolution Professionals LLP (RRPL), an Insolvency Professional Entity (IPE), duly recognized by IBBI [recognition number (IBBI/IPE/0084)].

Along with the support of Senior Ex-Bankers, RRPL brings with it a team of 100+ professionals comprising CA, CS, ICWA, MBA, advocates, engineers, and sector experts with vast experience and knowledge.


Services Offered by Resurgent Resolution Professionals LLP, an IPE, include:

  • Interim Resolution Professional (IRP)
  • Resolution Professional (RP)
  • Liquidator under Section-35 of IBC, 2016
  • Liquidator under Voluntary Liquidation
  • Authorised Representative for Class of Creditors in Committee of Creditors (CoC)

With its strong network of investors and funds and multifaceted teams of dedicated professionals, RRPL is one of the most preferred choices for Insolvency Services in India.

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