Due - Diligence at the time of Insolvency

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Due - Diligence at the time of Insolvency

Corporate insolvency insolvency is when a company cannot discharge its debt obligation or raise enough funds to meet its operational expenses. Corporate Insolvency is the phenomenon of reviving a sick or debt-ridden corporate entity through a structured and phased resolution mechanism known as the Corporate Insolvency Resolution Process (CIRP), whereas insolvency due-diligence services are where major Insolvency and restructuring service providers work. In India, the process and intricacies of corporate Insolvency are governed by the Insolvency and Bankruptcy Code, 2016, and respective Insolvency and Corporate Restructuring regulations around the world.

The corporate insolvency procedure involves identifying the corporate debtor's key assets, carrying out legal and financial due diligence of the debtor and the creditors, and making a summarized itinerary of the key assets that can be used to revive distressed assets of the company. The distressed assets of the corporate debtor, which cannot be revived or restructured through the CIRP, are finally sold off and liquidated to pay off the debts and liabilities of the corporate debtor. The CIRP process involves insolvency compliance review and risk assessment as well as a distressed asset due – diligence to arrive at a mutual accord between the lenders and borrowers to ensure the financial issues between both are amicably mitigated, and the original corporate personality of the corporate debtor remains intact. Insolvency is due–-diligence services that involve everything that entails the rigorous process of analyzing a company’s financial state based on existing economic metrics and corporate records and ascertaining the best possible solutions for the distressed entity. However, involving the right service provider is crucial to ensure that every stage of the due diligence process unfolds errorlessly and with utmost priority. 

At Enterslice, we are a trusted name in corporate insolvency restructuring and insolvency due diligence services and provide quality financial well-keeping services for your company undergoing bankruptcy resolution or corporate insolvency restructuring. We specialize in services such as Bankruptcy Due Diligence, Tax due diligence, forensic investigation, and risk analysis. Legal Due Diligence for Insolvency, Insolvency Compliance Review, Debtor Due Diligence Services, Creditors' Due Diligence in Insolvency, Insolvency Audit Services and Distressed Asset Due Diligence. Our team of skilled and proficient professionals will provide you with holistic legal, financial, and forensic due diligence services by working closely with your team with a very solution-oriented approach. We are driven by the ideals of excellence for our clients and ensure you do not have to run pillar–to–post to fulfil every miscellaneous requirement. Our single-window client support services interface ensures that you can choose from a variety of professional services we offer at Enterslice.     

Understanding the Insolvency and Bankruptcy Code, 2016

In the wake of a massive surge of companies winding up and going bankrupt due to excessive debt obligations, the Bankruptcy Law Reforms Committee (BLRC) formulated a comprehensive legal framework – Insolvency and Bankruptcy Code, 2016 to provide a restructuring mechanism to sick and dying entities and afford easy exit to companies whose shareholders wished to wind-up by selling-off the companies’ assets. As per IBC, the National Company Law Tribunal is the main body that governs the enactment of the code and oversees the process of corporate insolvency and due -diligence carried out by the insolvency professionals. The Resolution Professional (RP) is the person appointed by the court to collect all claims of money and loans made by the debtors, prepare a comprehensive insolvency assessment plan, and perform insolvency due diligence services. Based on the claims received, the RP forms a committee of creditors to represent the collective interests of all the lenders. Post legal and Insolvency due -diligence, the RP is responsible for distributing the proceeds from the dissolved capital of the liquidated company to the committee of creditors.

Stages to Insolvency Due Diligence

Filing of Insolvency

When a corporate debtor is unable to pay the loans of his/her debtors, either he can voluntarily file for Insolvency, or the financial creditors, operational creditors, or operational debtors can file for Insolvency with the National Company Law Tribunal for recovery of their loans. The NCLT examines the claims and decides whether to admit the application for Insolvency or not. On acceptance of the application, the CIRP process commences under section 14 of the Insolvency and Bankruptcy Code, 2016.

Submission of Resolution Plan

After approval of the Insolvency, the adjudicating authority appoints a professional as a Resolution Professional to conduct the insolvency resolution process and work in conjunction with the Insolvency due diligence services provider to further the process. The resolution plan is formulated keeping in view the Insolvency Risk Assessment and Distressed Asset Due Diligence principles, and the same is submitted by a resolution applicant to the ResolutionResolution professional.

Approval of the resolution plan

The Resolution plan is submitted to the Committee of Creditors for approval, who assent to their acceptance or rejection of the plan. An insolvency due diligence services provider or a creditor's due–diligence insolvency entity can independently review the resolution plan and provide their feedback on the same. The plan is implemented after approval, and the CIRP commences, initiating the moratorium period.

Time - Period for completion of CIRP

As per the Insolvency and Bankruptcy Code, the CIRP comprising of legal, due diligence and insolvency due diligence of the corporate debtor shall be completed within 180 days from the initiation of the CIRP, with an additional extension of not more than 90 additional permitted by the adjudicating authority.

Our Approach to Insolvency Due-Diligence Services

Legal, due diligence is a very crucial aspect of Insolvency and bankruptcy planning since it helps identify key challenges and issues that might come up in the future and analyzes the overall state of the company. At Enterslice, we provide competent and effective legal, due diligence, financial investigations, and Insolvency due diligence services based on several prevailing factors, such as the financial condition of the company, current market trends, and future projections to provide a detailed analysis of your company’s position.

 We cater Insolvency due diligence services by carefully analyzing several major sub-areas of your company that affect the overall structure of your enterprise. Our dedicated and specialized professional teams branch - out across all major sectors of corporate compliance and due diligence to ensure that there are no lapses in the overall due diligence process at the time of a liquidity event. Our forensic analysis and investigation team undertakes the necessary fact-checking and in-depth corroboration of the company’s financial health with the public records and prepares a comprehensive report on the gaps and weak areas that can potentially be detrimental to the further due diligence process. 

   Our audit and analysis team proficiently moves and identifies major risk areas in your company's accounting and reporting standards, such as – ensuring uniformity in accounting standards as per Indian GAAP or other relevant accounting standards, balance sheet and financial account statements with previous years, and future projections based on current position. Our forensic Analysis team ensures the internal controls and management of your company are in a sound position by identifying the possibilities of potential fraud and mismanagement, embezzlement, siphoning of funds, misrepresentation of accounts and Documents, or unaccounted loans and advances from the company. 

Scope of Due Diligence Services

Insolvency Due diligence is layered into several sub-areas, carries its own significance and requires specialized expertise. Our experts at Enterslice would delve into and examine each area of your company’s internal restructuring needs and provide a comprehensive report on how to proceed with the insolvency due diligence process.

Legal Due Diligence

We scrutinize and verify all major legal Documents and records such as Intellectual property licenses, Tax registrations and returns, incorporation Documents and shareholding patterns, lease and rent agreements and licenses, employment agreements and other material contracts related to mergers and acquisitions, and joint ventures. Most importantly, we examine all the details and Documents related to any ongoing cases or lawsuits and any legal pendency with any tribunal, court, or adjudicating authority.

Financial Due Diligence

Our experts shall examine all crucial Documents related to the company's financial records and statements. They corroborate the financial statements and highlight the exact right financial position of the company or not. They look into Documents such as balance sheets, audited and unaudited financial statements of previous years, ledgers and bank statements records of debtors and creditors, expenditures, assets and liabilities. Undertaking financial due diligence at the time of CIRP is very crucial since it highlights the actual internal financial situation of your company.  

Tax Due - Diligence

Tax due diligence entails the pending liabilities of the company concerning payment of outstanding taxes and /or filing of appropriate returns. Our team of chartered accounts, cost accountants, and tax professionals meticulously analyses tax audits and transcripts of the past three years and returns to ensure that tax compliances are adequately addressed and is a very integral part of our insolvency due diligence services.  

Forensic Due Diligence

Assessing the overall internal condition of the company is a must before undergoing any significant transaction such as a merger, acquisition, fundraising, bankruptcy, or liquidation. Experts in forensic reporting and analysis are required to carry out a forensic analysis and due diligence. At Enterslice, we understand the complex needs and expert opinions of experienced professionals to make crucial investigative analyses of your company’s financial standing, providing necessary insolvency due diligence services. Hence, we endeavour to provide you with the best quality services and professionals to ensure the significant business transactions of your enterprise undergo errorless.

Distressed Asset Due Diligence

Insolvency due diligence is crucial to assess and evaluate the worth of the property and assets within the purview of the CIRP properly. A registered property valuer or an auditor is the key professional tasked with evaluating the worth of the assets, which would form the basis of the Insolvency due diligence. At Enterslice, our services are effective and cost-effective and provide you with a complete 360-degree financial health checkup of your company.

Pre-Packaged Insolvency Due-Diligence

The Ministry of Corporate Affairs introduced the concept of Pre-packaged Insolvency, specifically for small and micro-capital businesses undergoing Insolvency. The Ministry saw a need for a specialized framework for bankruptcy and insolvency management of small businesses, especially in the wake of the COVID-19 pandemic, who did not have enough resources to comply with the rigorous compliance routine for restructuring as prescribed by the IBC. The monetary threshold set by the government or companies that are eligible for adopting pre-packaged Insolvency is up to Rs. 1 crore, and the time - period of the insolvency process has been reduced to 120 days from initiation. The main focus of this alternative is reducing compliance requirements and costs involved in the regular CIRP, which is unreasonable for several companies that have a very small or limited paid–up capital. It includes a reduction in initiation fees and the cost of subsequent components, fewer filing and compliance requirements, a time-bound and faster resolution process, and fast-tracked disposal of the application by Adjudication Authorities. At Enterslice, we constantly improve our Insolvency due diligence services to match present-day requirements and provide you with the best professional assistance possible. Our service plans are tailor-made and adaptable to the nature of your business and service requirements.

Why Choose Our Insolvency Due-Diligence Services

Specialized and Reliable

We provide holistic end-to-end professional Insolvency due diligence services tailored to the requirements of your business. Our Corporate insolvency investigation, due diligence, and compliance services suffice to cull – out major and minor gap areas in your Insolvency due diligence exercise and mitigate all major risks in the further processes.

Cost Efficient

Our service packs compare to all existing players in the Insolvency due diligence services and make us the most trusted brand in legal and financial services. Our inclusive services package includes insolvency due diligence services, bankruptcy due diligence, financial due diligence, insolvency risk assessment and review, and distressed assets due diligence. We ensure that you get the best value out of the money and time invested with us and ensure that.

Trusted by Clients

Our Insolvency due diligence services have been trusted by clients worldwide. With experience assisting over 1000+ corporate clients, our highly experienced team of professionals would assist you in providing Insolvency due diligence services to your enterprise to ensure that you do not miss out on any major insolvency compliance or insolvency risk assessment requirement.

Dedicated client assistance  

Our support team will be with you 24/7 to resolve your queries relating to insolvency due diligence services and financial due diligence. Our Services are meant to benefit your business by cutting time and effort and providing an excellent set of Insolvency due diligence services. At Enterslice, you can be assured of quality and timely resolution of your corporate needs and ensure that.

Challenges in Insolvency due - diligence

Time-bound mechanism

After the introduction of IBC, corporate Insolvency has been highly intensified and made into a systematic method to resolve corporate Insolvency. However, due to this, there is always a possibility of hassle and errors in the Insolvency due diligence process. As per the law, the CIRP is required to be completed within 130 days plus an extension of 90 days. At times, it becomes difficult to conclude the process smoothly within the given time frame. At Enterslice, we have structured our insolvency due-diligence services in such a manner as to make effective use of the resources and time available and provide you with the best possible bankruptcy and distressed assets due diligence services.

Lack of good Professionals

Catering sound insolvency due diligence services requires talented and experienced ResolutionResolution and other professionals having the required qualifications to undertake bankruptcy due diligence and legal, due diligence for Insolvency. To be registered with the Insolvency and Bankruptcy Board of India (IBBI), a professional shall have at least 15 years of experience as an advocate, company secretary, charted accountant, or cost accountant to be eligible for accreditation. We at Enterslice will cater to you with our best Insolvency due diligence services and debtor due diligence services by providing bankruptcy services of experienced professionals who shall assist with your Insolvency compliance review and provide debtor due diligence services in respect of distressed assets and loans and liabilities of the corporate debtor.

Complex resolution procedure

CIRP can be strenuous and demand expertise since the law on insolvency has not been in force in India for a long time. The Insolvency due diligence services provided by independent professionals are not up to mark to satisfy the overall insolvency compliance review requirements for the corporate debtors going into top liquidation. At Enterslice, our advanced insolvency due diligence services encompass a complete

Frequently Asked Questions

Insolvency due diligence is a process by which a corporate debtor undergoing CIRP engages the services of a professional bankruptcy services provider to carry out financial and legal due diligence of his entity.

Enterslice provides the following, but not limited, Insolvency due diligence services –

Bankruptcy Due Diligence, Corporate Insolvency Investigation, Financial Due Diligence in Insolvency, Insolvency Risk Assessment, Legal Due Diligence for Insolvency, Insolvency Compliance Review. Debtor Due Diligence Services, Creditors' Due Diligence in Insolvency, Insolvency Audit Services and Distressed Asset Due Diligence. Our team of dedicated and adept legal, accounting, and compliance professionals and consultants would assist you at every stage of the insolvency due diligence process. Whether you are a financial creditor or a corporate debtor, our Insolvency due diligence services will provide you with the necessary assistance and guidance required to efficiently move ahead with the corporate Insolvency Resolution Process and Bankruptcy management.

Insolvency due diligence is the fundamental exercise that is used to determine the

The correct financial position of the company going into CIRP. A Financial due diligence services provider examines the company’s financial records, capital structure, loans and liabilities, previous years' tax returns and bank statements, budgeting forecasts, capital expenditure, legal and material contracts, etc.  

The Resolution Professional or Interim Resolution Professional appointed by the Adjudicating Authority and consented to by the Committee of Creditors is the professional responsible for overseeing and discharging various functions of the Corporate Insolvency Resolution Process.

The committee of creditors consists of the debtors of the bankrupt company, such as financial creditors and operational creditors, and is formed by the Resolution Professional.

Bankruptcy is a legal process initiated by an individual or a business entity when it is unable to repay outstanding debts. It is a formal declaration that the debtor is unable to meet financial obligations and seeks relief from creditors. Insolvency, on the other hand, refers to a financial state where an individual, business, or organization is unable to meet its financial obligations and pay off its debts.

  A state of bankruptcy can lead to Insolvency, and the debtor has to file for bankruptcy with an insolvency professional who will initiate the process of discharging your debt obligations from your existing assets. In case your debt obligation is not resolvable from the insolvency process, The Resolution professional will proceed to liquidate your assets to discharge your debt obligations towards the creditors.

Pre-Packaged Insolvency Resolution Process (PIRP) is available only to Micro, small, and medium industries having a default value of up to Rs. 1 crore. The maximum time limit allotted for the completion of a PIRP is 120 days from its commencement.

Our services at Enterslice are reasonable and suitable if you can’t afford to dish out large sums on insolvent due diligence services. You can select from our cost-effective price quotes and service packs that best suit your requirements.

i) Documentation and advisory services

ii) Financial analysis and risk mitigation 

iii) 24x7 Dedicated Customer assistance 

iv) Skilled and Experienced Professionals

v) Time-intensive delivery of services.

vi) End-to-end transaction support 

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