{"id":10378,"date":"2020-05-04T21:14:13","date_gmt":"2020-05-04T15:44:13","guid":{"rendered":"https:\/\/swaritadvisors.com\/learning\/?p=10378"},"modified":"2020-05-04T21:14:15","modified_gmt":"2020-05-04T15:44:15","slug":"resolution-applicant-eligibility-under-section-29a-of-ibc-2016","status":"publish","type":"post","link":"https:\/\/swaritadvisors.com\/learning\/resolution-applicant-eligibility-under-section-29a-of-ibc-2016\/","title":{"rendered":"Resolution Applicant Eligibility under Section 29A of IBC, 2016"},"content":{"rendered":"\n<p class=\"has-drop-cap\">The Insolvency and Bankruptcy Code, 2016 has emerged as one\nof the key statutes under Section 29A that determines the eligibility of\nResolution Applicant during the Insolvency Resolution Process. The Code, when\noriginally formed, had not incorporated any provisions regarding the prevention\nof any defaulting promoters from buying-back a corporate debtor that would\noccur potentially at discounts. Subsequently, by an amendment in the Code,\nSection 29A was inserted with retrospective effect from 23 Nov 2017. Thereafter,\nthe second amendment to the Code, effective from 6 June 2018, included\namendments to Section 29A.<\/p>\n\n\n\n<div id=\"ez-toc-container\" class=\"ez-toc-v2_0_65 counter-hierarchy ez-toc-counter ez-toc-light-blue ez-toc-container-direction\">\n<p class=\"ez-toc-title\">Table of Contents<\/p>\n<label for=\"ez-toc-cssicon-toggle-item-6a3c466a86ee3\" class=\"ez-toc-cssicon-toggle-label\"><span class=\"\"><span class=\"eztoc-hide\" style=\"display:none;\">Toggle<\/span><span class=\"ez-toc-icon-toggle-span\"><svg style=\"fill: #999;color:#999\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" class=\"list-377408\" width=\"20px\" height=\"20px\" viewBox=\"0 0 24 24\" fill=\"none\"><path d=\"M6 6H4v2h2V6zm14 0H8v2h12V6zM4 11h2v2H4v-2zm16 0H8v2h12v-2zM4 16h2v2H4v-2zm16 0H8v2h12v-2z\" fill=\"currentColor\"><\/path><\/svg><svg style=\"fill: #999;color:#999\" class=\"arrow-unsorted-368013\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" width=\"10px\" height=\"10px\" viewBox=\"0 0 24 24\" version=\"1.2\" baseProfile=\"tiny\"><path d=\"M18.2 9.3l-6.2-6.3-6.2 6.3c-.2.2-.3.4-.3.7s.1.5.3.7c.2.2.4.3.7.3h11c.3 0 .5-.1.7-.3.2-.2.3-.5.3-.7s-.1-.5-.3-.7zM5.8 14.7l6.2 6.3 6.2-6.3c.2-.2.3-.5.3-.7s-.1-.5-.3-.7c-.2-.2-.4-.3-.7-.3h-11c-.3 0-.5.1-.7.3-.2.2-.3.5-.3.7s.1.5.3.7z\"\/><\/svg><\/span><\/span><\/label><input type=\"checkbox\"  id=\"ez-toc-cssicon-toggle-item-6a3c466a86ee3\"  aria-label=\"Toggle\" \/><nav><ul class='ez-toc-list ez-toc-list-level-1 ' ><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-1\" href=\"https:\/\/swaritadvisors.com\/learning\/resolution-applicant-eligibility-under-section-29a-of-ibc-2016\/#Eligibility_of_Resolution_Applicant\" title=\"Eligibility of Resolution Applicant\">Eligibility of Resolution Applicant<\/a><ul class='ez-toc-list-level-3' ><li class='ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-2\" href=\"https:\/\/swaritadvisors.com\/learning\/resolution-applicant-eligibility-under-section-29a-of-ibc-2016\/#Other_following_Conditions\" title=\"Other following Conditions\">Other following Conditions<\/a><\/li><\/ul><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-3\" href=\"https:\/\/swaritadvisors.com\/learning\/resolution-applicant-eligibility-under-section-29a-of-ibc-2016\/#Who_is_Not_eligible_to_be_resolution_applicant\" title=\"Who is\u00a0Not eligible to be resolution applicant?\">Who is\u00a0Not eligible to be resolution applicant?<\/a><ul class='ez-toc-list-level-3' ><li class='ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-4\" href=\"https:\/\/swaritadvisors.com\/learning\/resolution-applicant-eligibility-under-section-29a-of-ibc-2016\/#Conclusion\" title=\"Conclusion\">Conclusion<\/a><\/li><\/ul><\/li><\/ul><\/nav><\/div>\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Eligibility_of_Resolution_Applicant\"><\/span>Eligibility of Resolution Applicant<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>Definitions <strong><em>Section (5)<\/em><\/strong> of Code defines the\nmeaning of resolution applicant which states that:- &#8220;resolution\napplicant&#8221; is a person, who individually or jointly with any of the other\nperson, submits the resolution plan to a resolution professional pursuant to\nthe invitation made under in clause (h) of sub-section (2) of section 25 <\/p>\n\n\n\n<p>As per <strong><em>Clause (h) of Section 25(2) of the Code<\/em><\/strong>,\nthe Resolution Professional must invite resolution applicant who fulfill the\ncriteria as may be laid down by him with an approval of the committee of creditors.\nThis has to be with regard to the complexity and scale of operations of the\nbusiness of a corporate debtor and with other conditions as may be prescribed\nby the Board, to submit a resolution plan. The minimum eligibility criteria as\napproved by the committee of creditors are as below:<\/p>\n\n\n\n<p><strong>(A)<\/strong> <strong>To Companies and Strategic Investors including Limited Liability Partnerships (LLPs), Partnership Firms and Individuals<\/strong><\/p>\n\n\n\n<ul><li>Minimum Net Worth\/ Net Owned Funds (NOF) of Rs.50 Crores at the Group Level in accordance with immediately preceding financial year.<\/li><li>Net Worth will be computed as an aggregate value of paid-up share capital. All the reserves created out of profits and securities premium account, after deducting an aggregate value of the accumulated losses, miscellaneous expenditure and deferred expenditure not written off, and also does not includes reserve created out of revaluation of assets, back of depreciation.<\/li><li>Group can comprise of entities either controlling by or under common control with the applicant. Control means at least 26% of ownership. The entities remain part of the Group must be for at least 3 years.<\/li><\/ul>\n\n\n\n<p><strong>(B)<\/strong> <strong>Financial Investors \u2013 Funds \/ NBFCs \/ Banks \/ ARC \/ others<\/strong><\/p>\n\n\n\n<ul><li>Financial Investors includes Mutual Funds, Private Equity, Venture Capital Funds, Foreign Investment Institutions, Asset Reconstruction Companies, Non-Banking Finance Companies, Banks and other similar entities.<\/li><li>All this needs to be duly registered under mentioned regulations in India, and it needs to provide valid registration certificate copies along with all applicable constitutional documents, as a part of the response to this Request for Proposal.<\/li><li>Minimum Asset Under Management (AUM) or funds deployed of Rs.200 Crores in the immediately preceding completed financial year, or<\/li><li>Committed funds are available for investment and deployment in Indian companies or assets of Rs. 200 Crores in the immediately preceding completed financial year.<\/li><\/ul>\n\n\n\n<p><strong>(C)<\/strong> <strong>Proposals by the Consortium of Investors<\/strong><\/p>\n\n\n\n<ul><li>Proposals can be made with the support of a consortium of investors.<\/li><li>In the consortium cases, the proposal required to be made by a nominated lead applicant who must meet Net worth Criteria of a minimum of 51% of the total requirement.<\/li><li>Each member of a consortium requires to have positive Net Worth<\/li><li>The Net Worth criteria shall continue to be applicable on an aggregate basis for the consortium.<\/li><\/ul>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Other_following_Conditions\"><\/span>Other following Conditions<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>Along with the \u201cExpression of Interest\u201d, the prospective\nResolution Applicant must deposit <strong><em>Rs. 10 lakhs<\/em><\/strong> as an Earnest Money\nDeposit which is refundable, by way of demand draft. The applicants are\nrequested to provide the following documents along with the format of\nsubmission of Expression of Interest: <\/p>\n\n\n\n<ul><li>Copy of PAN of a Resolution Applicant<\/li><li>Copy of KYC of a\nResolution Applicant or authorized representative. <\/li><li>Copy of Address\nProof of a Resolution Applicant<\/li><li>Copies of Last 3\nYears the Audited Financial Statements<\/li><li>Copy of Board\nResolution authorizes to participate in the process of \u2018expression of interest\u2019\nand submission of the Resolution Plan for a Corporate Debtor.<\/li><\/ul>\n\n\n\n<p>It must also provide a duly stamped and signed\nconfidentiality undertaking according to the requirements provided under <strong><em>Regulation\n36(4)<\/em><\/strong> of the Insolvency Resolution Process for Corporate Persons\n(IBBI). Regulations, 2016 (CIRP Regulations) has the condition for receiving an\ninformation memorandum and other relevant information with relation to the\nCorporate Debtor. The interested Resolution Applicant must provide an\nundertaking along with the application for \u2018expression\nof interest\u2019 as needed under <strong><em>Regulation 36A (7)<\/em><\/strong>. <\/p>\n\n\n\n<p>All Potential Resolution Applicants have to read, understand\nand comply with all requirements under IBC, 2016 and CIRP Regulations or any\nother applicable regulations as mentioned under the IBC, 2016 which are in\nforce for the time being or that may come into force afterwards, for Resolution\nPlan or plans and all matters thereunder in pursuance to or in relation to this\ninvitation.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Who_is_Not_eligible_to_be_resolution_applicant\"><\/span>Who is\u00a0Not eligible to be resolution applicant?<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p><strong><em>Section-29A<\/em><\/strong>&#8211; A person will not be eligible to submit a\nresolution plan, if that particular person, or any other person acting jointly\nwith that person\u2014<\/p>\n\n\n\n<p><strong>(a)<\/strong> Who is an un-discharged\ninsolvent person<\/p>\n\n\n\n<p><strong>(b)<\/strong> Who is a\nwillful defaulter according to the guidelines of the (RBI) Reserve Bank of\nIndia that is issued under the Banking Regulation Act, 1949<\/p>\n\n\n\n<p><strong>(c)<\/strong> at a time of\nsubmission of the resolution, the plan has an account of a corporate debtor under\na management or control of a person or of whose such person is the promoter,\nwill be classified as a non-performing asset according to the guidelines of the\n(RBI) Reserve Bank of India which is issued under the Banking Regulation Act or\nin the guidelines of a financial sector regulator which is issued under other\nlaw enforced for the time being. It must be at least a period of <strong>1 year<\/strong> from the date of such classification\ntill the date of commencement of a corporate insolvency resolution process of\nthe corporate debtor: <\/p>\n\n\n\n<p><strong><em>Provided<\/em><\/strong> that the person has to be eligible to submit the\nresolution plan in case that person makes payment of all overdue amounts with\ninterest and charges relating to non-performing asset accounts before\nsubmission of that resolution plan <\/p>\n\n\n\n<p><strong><em>It is provided<\/em><\/strong> further that nothing in this clause, will apply\nto a resolution applicant, when such applicant is the financial entity and is\nnot a related party to a corporate debtor.<\/p>\n\n\n\n<p><strong><em>Explanation I<\/em><\/strong>\u2013 For purposes of the above proviso, the\nexpression &#8220;related party&#8221; will not include any financial entity, which\nis regulated by a financial sector regulator. And also if it is the financial\ncreditor of a corporate debtor and is a related party of a corporate debtor on\naccount of a conversion or a substitution of debt into equity shares or\ninstruments convertible into the equity shares, or completion of transactions\nas may be specified, before the date of commencement of insolvency.<\/p>\n\n\n\n<p><strong><em>&nbsp;Explanation II<\/em><\/strong>\u2014 For\npurposes of the above clause, when a resolution applicant has an account, or\nhas an account of the corporate debtor under a management or control of that\nperson or of whom such person is a promoter, will be classified as\nnon-performing asset. In case such account was acquired pursuant to a prior\nresolution plan approved under this Code then the provisions of the above\nclause must not apply to resolution applicant for the period of <strong>3 years<\/strong> from the date of approval of\nthat resolution plan by the Adjudicating Authority under the Code.<\/p>\n\n\n\n<p><strong>(d)<\/strong> Has been\nconvicted for the offence punishable with imprisonment \u2013 <\/p>\n\n\n\n<ul><li>for the term of two years or more under any Act\nmentioned under the Twelfth Schedule; or<\/li><li>for the term of seven years or more under any\nlaw for the time being in force:<\/li><\/ul>\n\n\n\n<p><strong><em>Provided<\/em><\/strong> that this clause will not apply to any person after\nthe expiry of a period of 2 years from imprisonment from the date of his\nrelease&nbsp; <\/p>\n\n\n\n<p><strong><em>Provided<\/em><\/strong> further that the above clause will not apply in\nrelation to a connected person referred in the clause of the Explanation I <\/p>\n\n\n\n<p><strong>(e) <\/strong>Is\ndisqualified to act as the director under Companies Act <\/p>\n\n\n\n<p><strong><em>Provided <\/em><\/strong>that this clause will not apply in relation to a\nconnected person referred to in clause of Explanation I <\/p>\n\n\n\n<p><strong>(f)<\/strong> Is prohibited\nby (SEBI) Securities and Exchange Board of India from trading in securities or\naccessing these securities markets <\/p>\n\n\n\n<p><strong>(g)<\/strong> Has been the\npromoter or in a management or in control of the corporate debtor in which a\npreferential transaction, undervalued transaction, fraudulent transaction or\nextortionate credit transaction has taken place and in respect to an order\nwhich has been made by Adjudicating Authority under the Code<\/p>\n\n\n\n<p><strong><em>Provided <\/em><\/strong>that above clause will not apply if a preferential\ntransaction,&nbsp; extortionate credit\ntransaction, undervalued transaction or fraudulent transaction has been taken\nplace before the acquisition of a corporate debtor by a resolution applicant\npursuant to the resolution plan approved under the Code or plan approved by a\nfinancial sector regulator or a court. And that resolution applicant has been\nnot otherwise contributed to the preferential transaction, extortionate credit\ntransaction, undervalued transaction or fraudulent transaction has been\nexecuted a guarantee in favour of the creditor in respect of corporate debtor\nagainst which an application for the insolvency resolution made by that\ncreditor. It has admitted under the Code and guarantee has been invoked by a\ncreditor and remains unpaid in full or part thereof<\/p>\n\n\n\n<p><strong>(i)<\/strong> Who is\nsubject to any disability, in correspondence to clauses (a) to (h), under any\nother law in a jurisdiction outside India; or <\/p>\n\n\n\n<p><strong>(j)<\/strong> Who has a\nconnected person that is not eligible under clauses (a) to (i)<\/p>\n\n\n\n<p><strong><em>Explanation I<\/em><\/strong>\u2014 For the purposes of the above clause, the\nexpression &#8220;connected person&#8221; means that\u2014 <\/p>\n\n\n\n<ul><li>a person, who is a promoter, or in management or\ncontrol of the resolution applicant; or<\/li><li>any person who will be a promoter or in\nmanagement or control of the business of the corporate debtor while\nimplementation of the resolution plan; or<\/li><li>the holding company, associate company,\nsubsidiary company or related party of a person referred to in clauses (i) and\n(ii):<\/li><\/ul>\n\n\n\n<p><strong><em>Provided<\/em><\/strong> that nothing in the clause of Explanation I will apply\nto a resolution applicant when such applicant is the financial entity and is\nnot a related party of to a corporate debtor<\/p>\n\n\n\n<p><strong><em>Provided <\/em><\/strong>further that the expression <strong><em>&#8220;related party&#8221;<\/em><\/strong> must not include a financial entity that is regulated by the financial sector regulator. In case if it is the financial creditor of a corporate debtor and also a related party of the corporate debtor solely on account of conversion or substitution of debt into <strong><a href=\"https:\/\/swaritadvisors.com\/learning\/procedure-for-issue-of-sweat-equity-shares-in-india\/\">equity shares<\/a><\/strong> or instruments convertible into equity shares or completion of such transactions as may be specified, before the date of commencement of insolvency.<\/p>\n\n\n\n<p><strong><em>Explanation II<\/em><\/strong>\u2014For purposes of this section, <strong><em>&#8220;financial\nentity&#8221;<\/em><\/strong> means the following entities that meet the criteria or\nconditions as the Central Government may notify in this behalf, after\nconsultation with the financial sector regulator, namely\u2014<\/p>\n\n\n\n<ul><li>a scheduled bank<\/li><li>Any entity that is regulated by a foreign central bank or a securities market regulator or any other financial sector regulator has jurisdiction outside India that jurisdiction must compliant with the Financial Action Task Force Standards. It has to be a signatory to the International Organization of Securities Commissions Multilateral Memorandum of Understanding<\/li><li>\u00a0Any investment vehicle. It must be registered as a foreign institutional investor, registered as foreign portfolio investor or as foreign venture capital investor, where the terms must have the meaning assigned to them in Regulation 2 of the Foreign Exchange Management (Transfer or Issue of Security by a Person Resident Outside India) Regulations, 2017 that is made under <strong><em>(FEMA)<\/em><\/strong> Foreign Exchange Management Act, 1999 <\/li><li>the asset <strong><a href=\"https:\/\/en.wikipedia.org\/wiki\/Reconstruction_(law)\">reconstruction company<\/a><\/strong> registered with the <strong><em>(RBI)<\/em><\/strong> Reserve Bank of India under section 3 of the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 <\/li><li>the Alternate Investment Fund registered with <strong><em>(SEBI)<\/em><\/strong> Securities and Exchange Board of India<\/li><li>Such categories of persons as may be notified by Central Government.<\/li><\/ul>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Conclusion\"><\/span>Conclusion<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>It is necessary to note that <strong><em>section 29A<\/em><\/strong> has laid down\na multiple layered and comprehensive standard of disqualification which will\nexclude bona fide resolution applicant. The application of the section might\nalso disqualify the crucial stakeholders from bidding the revival of the\ncompany. Therefore, a certain amount of leniency is made by the courts in\ndeciding the issue regarding the disqualifications, which is need of the hour\nto maximize the objectives of this Code. <\/p>\n\n\n\n<div class=\"read\"><p><b>Also, Read:<\/b> <mark><a href=\"https:\/\/swaritadvisors.com\/learning\/nbfcs-with-assets-worth-500-crore-shall-be-brought-under-ibc-purview\/\" target=\"_blank\" rel=\"noopener noreferrer\">NBFCs with assets worth 500 Crore shall be brought under IBC purview<\/a><\/mark>.<\/p><\/div>\n","protected":false},"excerpt":{"rendered":"<p>The Insolvency and Bankruptcy Code, 2016 has emerged as one of the key statutes under Section 29A that determines the eligibility of Resolution Applicant during the Insolvency Resolution Process. The Code, when originally formed, had not incorporated any provisions regarding the prevention of any defaulting promoters from buying-back a corporate debtor that would occur potentially [&hellip;]<\/p>\n","protected":false},"author":18,"featured_media":10379,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":[],"categories":[617],"tags":[618,619,620],"_links":{"self":[{"href":"https:\/\/swaritadvisors.com\/learning\/wp-json\/wp\/v2\/posts\/10378"}],"collection":[{"href":"https:\/\/swaritadvisors.com\/learning\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/swaritadvisors.com\/learning\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/swaritadvisors.com\/learning\/wp-json\/wp\/v2\/users\/18"}],"replies":[{"embeddable":true,"href":"https:\/\/swaritadvisors.com\/learning\/wp-json\/wp\/v2\/comments?post=10378"}],"version-history":[{"count":9,"href":"https:\/\/swaritadvisors.com\/learning\/wp-json\/wp\/v2\/posts\/10378\/revisions"}],"predecessor-version":[{"id":10389,"href":"https:\/\/swaritadvisors.com\/learning\/wp-json\/wp\/v2\/posts\/10378\/revisions\/10389"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/swaritadvisors.com\/learning\/wp-json\/wp\/v2\/media\/10379"}],"wp:attachment":[{"href":"https:\/\/swaritadvisors.com\/learning\/wp-json\/wp\/v2\/media?parent=10378"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/swaritadvisors.com\/learning\/wp-json\/wp\/v2\/categories?post=10378"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/swaritadvisors.com\/learning\/wp-json\/wp\/v2\/tags?post=10378"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}