REC Limited · NSE:RECLTD
REC — Investor Presentation (February 2018)
34 slides from REC's investor presentation, Feb 21, 2018
Slide 1: Corporate Misgovernance, Non Performing Assets and Insolvency and Bankruptcy Code 2016
“CORPORATE MISGOVERNANCE, NON PERFORMING ASSETS AND INSOLVENCY AND BANKRUPTCY CODE 2016 Deepa Krishan, Member (Technical), NCLT, New Delhi 21-02-2018 1 (Email: deepakrishan@gmail.com)
Slide 2: Corporate governance
Corporate governance • The Companies Act, 1956 (“1956 Act”) • Ineffective at handling some of the present-day challenges • The Companies Act, 2013 • Enacted with a view to meeting the present-day challenges of corporate governance arising from stakeholders’ expectations. • The 2013 Act ushered • In
Slide 3: National Company Law Tribunal
National Company Law Tribunal • Headed by President who is a retired Chief Justice of High Court. • Judicial Members • Technical Members • Presently 11 Benches at 10 Stations • Ahmedabad • Allahabad • Bengaluru • Chandigarh • Chennai • Guwahati • Hyderabad • Kolkata • Mumbai • New Delhi Deepa Krisha
Slide 4: Companies Act, 2013
Companies Act, 2013 • More stringent provisions to ensure better Corporate Governance • Reporting requirements • Duties of Directors • Regular meetings of the Board • Provisions to protect minority shareholders • Oppression and mismanagement • Amalgamation and Merger • Winding Up • Class action suit
Slide 5: Majority-minority shareholder imbalance
Majority-minority shareholder imbalance • Major corporate governance issue • Possibility of under-representation of minority shareholders’ views and interests • Likelihood of domination of majority shareholders’ opinion due to the conferment of significant authority upon the directors appointed (or
Slide 6: Corporate Winding Up
Corporate Winding Up • Time involved in getting winding up order from a Company Court is very high and during this time promoters retain control of management often leading to deterioration in corporate governance. • Priority of payments • Statutory dues get priority over other creditors. • Secured
Slide 7: Non-performing Assets
Non-performing Assets • An asset, including a leased asset, becomes nonperforming when it ceases to generate income for the bank. • NPA is a loan or an advance where: • interest and/ or instalment of principal remains overdue for a period of more than 90 days in respect of a term loan, • the account
Slide 8: RBI, the NPA and Banks
RBI, the NPA and Banks: • The B.R. Act 1949 RBI is used to regulate and supervise banks but never before RBI was asked to assess the quality of commercial loans and advise banks the steps to recover the loan, which was hitherto exclusively the functions of the lending banks, their administration and
Slide 9: GNPA Ratios for Public Sector Banks
GNPA Ratios for Public Sector Banks Deepa Krishan, Member (Technical), NCLT, New Delhi 21-02-2018 9 (Email: deepakrishan@gmail.com)
Slide 10: Deepa Krishan, Member (Technical), NCLT, New Delhi (Email: deepakrishan@gmail.com)
Deepa Krishan, Member (Technical), NCLT, New Delhi 21-02-2018 10 (Email: deepakrishan@gmail.com)
Slide 11: Existing Laws Relating to Recovery of Debt and Revival of Borrowers
Existing Laws Relating to Recovery of Debt and Revival of Borrowers • CPC: A creditor may file a money recovery suit against a defaulting debtor under the Civil Procedure Code, 1908 (CPC) with jurisdictional Civil Court. However, owing to high backlog of cases and slow adjudication process, it may t
Slide 12: Addressing NPAs of Bank: Insolvency & Bankruptcy code to play major role in resolution
Addressing NPAs of Bank: Insolvency & Bankruptcy code to play major role in resolution • With the government and the Reserve Bank of India (RBI) deciding to first tackle the top-50 large stressed assets into the banking universe, corporate insolvency will emerge as a credible solution for resolution
Slide 13: How IBC will play major role in the NPA resolution
How IBC will play major role in the NPA resolution • It is expected that IBC will result in rise in debt restructuring by a creditor with the new owner or even with existing owner of the business rather than liquidation. • Fear of investigation made banks reluctant to undertake debt re-structuring e
Slide 14: IBC a misnomer
IBC a misnomer • IBC is the short form for Insolvency and Bankruptcy Code, 2016. • It appears that this is a law to provide a company to be insolvent and bankrupt • Thereby indicating the death of the company, with no chance of revival or rehabilitation • And the remaining assets are distributed amo
Slide 15: Scheme of IBC
Scheme of IBC • Applicable to • Corporates and limited liability partnerships (LLP) • Adjudicating Authority is NCLT • Individuals or partnership firms • Administered by Debt Resolution Tribunal (DRT) Deepa Krishan, Member (Technical), NCLT, New Delhi 21-02-2018 15 (Email: deepakrishan@gmail.com)
Slide 16: Scheme of IBC for Corporates
Scheme of IBC for Corporates 1. Application to Adjudicating Authority that is NCLT by 1. Financial Creditor 2. Operational Creditor 3. Corporate Debtor 2. NCLT to give notice to Corporate Debtor In the case of application by Corporate Debtor to the Financial Creditors 3. Insolvency commencement date
Slide 17: Scheme of IBC for Corporates
Scheme of IBC for Corporates (continued) • Application to Adjudicating Authority by • Financial Creditor u/s 7 of IBC • Financial Creditor means any person to whom a financial debt is owed and includes a person to whom such debt has been legally assigned or transferred to • May be filed jointly also
Slide 18: Scheme of IBC for Corporates
Scheme of IBC for Corporates • Application to Adjudicating Authority by (continued) • Operational Creditor u/s 9 of IBC • Operational Creditor means any person to whom an operational debt is owed and includes a person to whom such debt has been legally assigned or transferred to • “Operational Debt”
Slide 19: Scheme of IBC for Corporates
Scheme of IBC for Corporates (continued) • Application by Operational Creditor to include • Copy of the invoice demanding payment or demand notice delivered by the OC to the CD • An affidavit to the effect that there is no notice given by the CD relating to a dispute of the unpaid Operational Debt •
Slide 20: Scheme of IBC for Corporates
Scheme of IBC for Corporates (continued) • Application to Adjudicating Authority by • Corporate Debtor u/s 10 of IBC • Corporate Debtor means any person who owes a debt to any person • And has committed a default • Application to include • Its books of accounts and such other document relating to su
Slide 21: Persons not entitled to make application to initiate Corporate Insolvency Resolution Process
Persons not entitled to make application to initiate Corporate Insolvency Resolution Process • CD undergoing CIRP • CD having completed CIRP, 12 months preceding the date of making an application • CD or a FC who has violated any terms of the Resolution plan which was approved 12 months preceding th
Slide 22: Time limit for completion of Insolvency Resolution Process
Time limit for completion of Insolvency Resolution Process • CIRP to be completed within 180 days from the date of admission of application to initiate such process • RP may apply for extension of CRP by maximum of 90 days, if so, instructed by a Resolution passed at a meeting of COC by a vote of 75
Slide 23: Declaration of Moratorium
Declaration of Moratorium • After admission of application u/s 7/9/10, AA shall by an order • declare a moratorium, and • cause a public announcement of the initiation of CIRP, and • appoint an IRP Deepa Krishan, Member (Technical), NCLT, New Delhi 21-02-2018 23 (Email: deepakrishan@gmail.com)
Slide 24: Section 14 of IBC - Moratorium
Section 14 of IBC - Moratorium • Subject to provisions of sub-sections (2) and (3), on the insolvency commencement date, the Adjudicating Authority shall by order declare moratorium for prohibiting all of the following, namely: (a) The institution of suits or continuation of pending suits or proceed
Slide 25: Section 14 of IBC - Moratorium (Continued)
Section 14 of IBC – Moratorium (Continued) • 2. The supply of essential goods or services to the corporate debtor as may be specified shall not be terminated or suspended or interrupted during moratorium period. 3. The provisions of sub-section (1) shall not apply to such transactions as may be noti
Slide 26: Management of Affairs of CD by IRP
Management of Affairs of CD by IRP • From the date of appointment of IRP • Management of affairs of CD shall rest in the IRP • IRP shall act and execute in the name and on behalf of the CD, all deeds, receipts and other documents • Take such actions as may be specified by the Board • Have the author
Slide 27: Committee of Creditors
Committee of Creditors • To be constituted by IRP • To comprise of all Financial Creditors of CD • Related parties of CD shall not have right of representation, participation or voting in a meeting of COC • All decisions of the COC shall be taken by a vote of not less than 75% of voting share of the
Slide 28: Submission of Resolution Plan
Submission of Resolution Plan • A resolution applicant may submit resolution plan to the RP • RP to examine each resolution plan to confirm that such plan • Provides for payment of CIRP costs in priority to the repayment of other debts • Payment of debt of OC • Provides for management of the affairs
Slide 29: Liquidation Process
Liquidation Process • Adjudicating Authority • Before expiry of CIRP period, or • On rejection of Resolution Plan for non-compliance of the requirements • To pass an order for liquidation of CD u/s 33 of IBC • To issue a public announcement stating that the CD is in liquidation, and • Such order to
Slide 30: Distribution of Assets on Liquidation (sec.-53)
Distribution of Assets on Liquidation (sec.-53) • The proceeds from sale of liquidation assets shall be distributed in the following order of priority • Costs of CIRP and liquidation costs to be paid in full • Debts to rank equally between and among the following • Workmen dues for 24 months precedi
Slide 31: Application by liquidator for dissolution of CD
• Application by liquidator to AA for dissolution of CD whether assets of the CD have been completely liquidated • AA to order dissolution of CD from the date of the order Deepa Krishan, Member (Technical), NCLT, New Delhi 21-02-2018 31 (Email: deepakrishan@gmail.com)
Slide 32: Fast track CIRP
Fast track CIRP • In cases where • CD has assets and income below notified level, or • CD with such class of Creditors or amount of debt as may be notified or • Such other category of Corporate persons as may be notified • Fast Track Corporate Insolvency Process to be completed within 90 days Deepa
Slide 33: Section 238
Section 238 • The provisions of this Code shall have effect, notwithstanding anything inconsistent therewith contained in any other law for the time being in force or any instrument having effect by virtue of such law. Deepa Krishan, Member (Technical), NCLT, New Delhi 21-02-2018 33 (Email: deepakri
Slide 34: Thank You
Thank You Deepa Krishan, Member (Technical), NCLT, New Delhi 21-02-2018 34 (Email: deepakrishan@gmail.com)