Section 10 of IBC : Section 10: Initiation Of Corporate Insolvency Resolution Process By Corporate Applicant

Explanation using Example

Imagine XYZ Pvt. Ltd., a company that manufactures electronic components, has been facing severe financial difficulties. Despite several attempts to restructure its debts, the company is unable to repay its creditors. The company's board of directors realizes that the company's liabilities far exceed its assets and it is unable to meet its financial obligations as they come due. Recognizing the default on debt repayments, the board decides to initiate a corporate insolvency resolution process to address the financial collapse.

The board passes a special resolution, as required by their company's bylaws, authorizing the filing of an application under Section 10 of The Insolvency and Bankruptcy Code, 2016. They select a competent resolution professional to manage the company's affairs during the insolvency process and prepare the necessary documentation, including books of account and other financial statements.

Subsequently, XYZ Pvt. Ltd., through its authorized representative, files an application with the National Company Law Tribunal (NCLT), the Adjudicating Authority, along with the prescribed fee. The application is complete and includes all the necessary particulars, the special resolution passed by the board, and the details of the proposed interim resolution professional.

The NCLT reviews the application within 14 days and, finding no disciplinary proceedings pending against the proposed resolution professional, admits the application. With the admission of the application, the corporate insolvency resolution process for XYZ Pvt. Ltd. commences, and the company takes its first step towards resolving its financial distress under the framework provided by the Insolvency and Bankruptcy Code.