Insolvency Proceedings

Insolvency proceedings, also known as bankruptcy proceedings is a  legal processes initiated when an individual or entity becomes insolvent and are unable to pay their debts by order of Insolvency court 

Process of Insolvency 

1. Initiation of Insolvency Proceedings: Insolvency proceedings can be initiated voluntarily by the debtor (voluntary insolvency) or involuntarily by creditors (involuntary insolvency) after mandatory notice to the debtor .

2. Appointment of Insolvency Practitioner: insolvency practitioner's  is appointed to oversee the proceedings and manage the assets of the insolvent estate. 

3. Moratorium: Upon the commencement of insolvency proceedings, an automatic stay or moratorium may be imposed, which prevents creditors from taking legal action to recover debts outside of the insolvency process. 

4. Creditor Claims and Distribution: Creditors are given an opportunity to file claims with the insolvency practitioner, detailing the amount and nature of their debts. The insolvency practitioner then assesses the claims, liquidates assets (in the case of liquidation proceedings), and distributes proceeds to creditors according to the priority of their claims as determined by law.

5. Approval of Plan or Scheme: In reorganization proceedings, the debtor may propose a plan or scheme of arrangement outlining how they intend to restructure their debts and repay creditors. This plan must be approved by the relevant stakeholders, such as creditors and the court, before it can be implemented.

6. Discharge or Exit: Once the terms of the insolvency proceedings have been fulfilled, the debtor may be discharged from their remaining debts (in the case of liquidation) or exit the proceedings with a restructured debt repayment plan in place.

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