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With reference to Insolvency and Bankruptcy Code, consider the following statements:
The insolvency resolution process can be initiated by any shareholder of the firm.
It covers only the secured financial creditors.
Prepacks is proposed under which incumbent management will retain control of the company until a final agreement is reached.
Q. Which of the statements given above is/are correct?
- a)1 and 2 only
- b)2 only
- c)3 only
- d)1 and 3 only
Correct answer is option 'D'. Can you explain this answer?
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Most Upvoted Answer
With reference to Insolvency and Bankruptcy Code, consider the follow...
- Statement 1 is correct. The insolvency resolution process can be initiated of the stakeholders of the firms: firm/debtors/creditors/employees. A shareholder is always a stakeholder but a stakeholder is not always a shareholder.
- Statement 2 is incorrect. Unlike SARFAESI act. Insolvency and Bankruptcy code covers both secured and unsecured financial creditors.
- Statement 3 is correct. In the case of pre-packs, the incumbent management retains control of the company until a final agreement is reached. It is an agreement for the resolution of the debt of a distressed company through an agreement between secured creditors and investors instead of a public bidding process.
Knowledge Base: Section 53 of the IBC has established an order of priority among creditors, which will determine the sequence in which outstanding debts will be repaid –
- Insolvency resolution process and liquidation costs;
- Workmen’s dues (for 24 months), and secured dues, if the security has been relinquished;
- Employee's dues (for 12 months);
- Unsecured financial creditors;
- Government dues, and unpaid dues to secured creditor, if the security has been realized;
- Remaining debts and dues (which include, unsecured operational debts);
- Preference shareholders;
- Equity shareholders.
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Community Answer
With reference to Insolvency and Bankruptcy Code, consider the follow...
The correct answer is option 'D' - 1 and 3 only.
Explanation:
1. The insolvency resolution process can be initiated by any shareholder of the firm.
This statement is correct. As per the Insolvency and Bankruptcy Code (IBC), any shareholder of a company can initiate the insolvency resolution process by filing an application before the National Company Law Tribunal (NCLT). The application should provide evidence of default on the part of the company.
2. It covers only the secured financial creditors.
This statement is incorrect. The insolvency resolution process under the IBC covers all financial creditors, whether secured or unsecured. Financial creditors include banks, financial institutions, debenture holders, etc. The IBC provides a mechanism for the resolution of insolvency cases in a time-bound manner and aims to maximize the value of assets and ensure a fair distribution of assets among creditors.
3. Prepacks is proposed under which incumbent management will retain control of the company until a final agreement is reached.
This statement is correct. Prepacks, or pre-packaged insolvency resolution plans, are proposed under the IBC to facilitate the resolution process. Under prepacks, the incumbent management of a company retains control until a final agreement is reached between the stakeholders. This allows for a smoother transition and continuity of operations during the resolution process.
In conclusion, statement 1 is correct as any shareholder can initiate the insolvency resolution process, and statement 3 is correct as prepacks allow the incumbent management to retain control until a final agreement is reached. Therefore, the correct answer is option 'D' - 1 and 3 only.
Explanation:
1. The insolvency resolution process can be initiated by any shareholder of the firm.
This statement is correct. As per the Insolvency and Bankruptcy Code (IBC), any shareholder of a company can initiate the insolvency resolution process by filing an application before the National Company Law Tribunal (NCLT). The application should provide evidence of default on the part of the company.
2. It covers only the secured financial creditors.
This statement is incorrect. The insolvency resolution process under the IBC covers all financial creditors, whether secured or unsecured. Financial creditors include banks, financial institutions, debenture holders, etc. The IBC provides a mechanism for the resolution of insolvency cases in a time-bound manner and aims to maximize the value of assets and ensure a fair distribution of assets among creditors.
3. Prepacks is proposed under which incumbent management will retain control of the company until a final agreement is reached.
This statement is correct. Prepacks, or pre-packaged insolvency resolution plans, are proposed under the IBC to facilitate the resolution process. Under prepacks, the incumbent management of a company retains control until a final agreement is reached between the stakeholders. This allows for a smoother transition and continuity of operations during the resolution process.
In conclusion, statement 1 is correct as any shareholder can initiate the insolvency resolution process, and statement 3 is correct as prepacks allow the incumbent management to retain control until a final agreement is reached. Therefore, the correct answer is option 'D' - 1 and 3 only.
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With reference to Insolvency and Bankruptcy Code, consider the following statements: The insolvency resolution process can be initiated by any shareholder of the firm. It covers only the secured financial creditors. Prepacks is proposed under which incumbent management will retain control of the company until a final agreement is reached. Q. Which of the statements given above is/are correct?a)1 and 2 onlyb)2 onlyc)3 onlyd)1 and 3 onlyCorrect answer is option 'D'. Can you explain this answer?
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With reference to Insolvency and Bankruptcy Code, consider the following statements: The insolvency resolution process can be initiated by any shareholder of the firm. It covers only the secured financial creditors. Prepacks is proposed under which incumbent management will retain control of the company until a final agreement is reached. Q. Which of the statements given above is/are correct?a)1 and 2 onlyb)2 onlyc)3 onlyd)1 and 3 onlyCorrect answer is option 'D'. Can you explain this answer? for UPSC 2024 is part of UPSC preparation. The Question and answers have been prepared according to the UPSC exam syllabus. Information about With reference to Insolvency and Bankruptcy Code, consider the following statements: The insolvency resolution process can be initiated by any shareholder of the firm. It covers only the secured financial creditors. Prepacks is proposed under which incumbent management will retain control of the company until a final agreement is reached. Q. Which of the statements given above is/are correct?a)1 and 2 onlyb)2 onlyc)3 onlyd)1 and 3 onlyCorrect answer is option 'D'. Can you explain this answer? covers all topics & solutions for UPSC 2024 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for With reference to Insolvency and Bankruptcy Code, consider the following statements: The insolvency resolution process can be initiated by any shareholder of the firm. It covers only the secured financial creditors. Prepacks is proposed under which incumbent management will retain control of the company until a final agreement is reached. Q. Which of the statements given above is/are correct?a)1 and 2 onlyb)2 onlyc)3 onlyd)1 and 3 onlyCorrect answer is option 'D'. Can you explain this answer?.
With reference to Insolvency and Bankruptcy Code, consider the following statements: The insolvency resolution process can be initiated by any shareholder of the firm. It covers only the secured financial creditors. Prepacks is proposed under which incumbent management will retain control of the company until a final agreement is reached. Q. Which of the statements given above is/are correct?a)1 and 2 onlyb)2 onlyc)3 onlyd)1 and 3 onlyCorrect answer is option 'D'. Can you explain this answer? for UPSC 2024 is part of UPSC preparation. The Question and answers have been prepared according to the UPSC exam syllabus. Information about With reference to Insolvency and Bankruptcy Code, consider the following statements: The insolvency resolution process can be initiated by any shareholder of the firm. It covers only the secured financial creditors. Prepacks is proposed under which incumbent management will retain control of the company until a final agreement is reached. Q. Which of the statements given above is/are correct?a)1 and 2 onlyb)2 onlyc)3 onlyd)1 and 3 onlyCorrect answer is option 'D'. Can you explain this answer? covers all topics & solutions for UPSC 2024 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for With reference to Insolvency and Bankruptcy Code, consider the following statements: The insolvency resolution process can be initiated by any shareholder of the firm. It covers only the secured financial creditors. Prepacks is proposed under which incumbent management will retain control of the company until a final agreement is reached. Q. Which of the statements given above is/are correct?a)1 and 2 onlyb)2 onlyc)3 onlyd)1 and 3 onlyCorrect answer is option 'D'. Can you explain this answer?.
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