Advisory Services
Audit
Consulting
ESG Advisory
RBI Registration
SEBI Registration
IRDA Registration
FEMA Advisory
Compliances
IBC Services
VCFO Services
Growing
Developing
ME-1
ME-2
EU-1
EU-2
SE
Others
Select Your Location
Section 3(7) of the IBC 2016, (Code), has excluded the financial service providers (FSPs), which concludes that the corporate insolvency resolution process cannot be commenced against the financial services generally. Yet, by virtue of Section 227 of the IBC Code, the Central Government may by making notification provide insolvency and liquidation proceedings for the financial service providers.
Therefore, the government has implemented the Insolvency and Liquidation Proceedings of Financial Service Providers and Application to Adjudicating Authority Rules, 2019 for the Non-Banking Financial Companies, which includes housing finance companies with asset size of Rs. 500 Crore or more as per the last audited balance sheet.
The Government has also mentioned that the specific categories of FSPs that do not fall under the systemically important category. Such FSPs shall be resolved under the normal provisions of the Code as corporate debtors, in consultation with the appropriate regulator. The Rules have provided a framework for the insolvency and liquidation proceedings of systemically important Financial Service Providers other than banks.
Table of Contents
The liquidator or an administrator is appointed for the insolvency resolution procedure by the National Company Law Tribunal (NCLT) as per the rules. The important points to be focused on the procedure are as below:
Read our article:Insolvency and Bankruptcy Code now covers NBFCs and other FSPs
These rules have bridged the gap and taken care of FSPs during the insolvency resolution process in India. The issue is whether the definition of a ‘financial service provider’ covers its applicability in relation to the NBFCs. As NBFCs perform various other functions than taking deposits, so the moot question remains would NBFCs fall into the ambit of the definition of the financial service provider?
Secondly, the possibility that the investors of an NBFC would prefer the court-monitored IBC process rather than risking a private settlement. The courts have already being burdened with a lot more cases. Thus the government has of the view that dispute of insolvency resolution must be taken up by the IBC for the FSPs. Thirdly there might be jurisdictional issues with regard to the insolvency and bankruptcy proceedings of the financial service provider.
These rules have filled the systematic vacuum as the new rules under IBC was a timely step for resolution of financial services providers, permitting interplay between regulators, creditors and the National Company Law Tribunal (NCLT) for appropriate actions. Therefore, the introduction of these new rules which cover the FSPs under the veil of the insolvency resolution process can be seen as a milestone in the way to protect the interests of the investors at all levels of financial investment setup.
Also, Read: Insolvency and Bankruptcy Code: Simplified Version .
Soumya has done LLB (Hons) and has a 2+years experience in writing. Her main interest is in reading judgments, new enactments and amendments taking around in law. She always strives to bring the best to work that she does.
Black money has been the subject of heated political debate in India for a long time. Successiv...
The Apex Court pronounced a judgement in the case titled Tata Motors Vs The Brihan Mumbai Elect...
Since economies are moving towards digitalisation and making it feasible to conduct transaction...
The Alternative Investment Funds (AIFs) Pro-rata and Pari-Passu Rights Proposal Consultation Pa...
The Financial Action Task Force, i.e. FATF (the Force), is the global money laundering and terr...
Advance tax refers to the payment of the tax liability before the end of the relevant financia...
On 11.12.15, the Hon’ble Delhi High Court (HC) pronounced a landmark judgement in the case ti...
Money laundering can be defined as the process of illegal concealment of the origin of money ob...
Every assessee in India is obligated to file an income tax return and make the timely payment o...
In the recent past, India has seen burgeoning demand for internet and smartphones. The rapid ri...
Are you human?: 7 + 9 =
Easy Payment Options Available No Spam. No Sharing. 100% Confidentiality
The Reserve Bank of India has allowed banks to increase credit flow to NBFCs (Non-Banking Financial Companies). For...
27 Oct, 2018
NBFC in India has witnessed huge growth in Indian Market. Considering growth factor and expanding business globally...
09 Oct, 2017
Red Herring Top 100 Asia enlists outstanding entrepreneurs and promising companies. It selects the award winners from approximately 2000 privately financed companies each year in the Asia. Since 1996, Red Herring has kept tabs on these up-and-comers. Red Herring editors were among the first to recognize that companies such as Google, Facebook, Kakao, Alibaba, Twitter, Rakuten, Salesforce.com, Xiaomi and YouTube would change the way we live and work.
Researchers have found out that organization using new technologies in their accounting and tax have better productivity as compared to those using the traditional methods. Complying with the recent technological trends in the accounting industry, Enterslice was formed to focus on the emerging start up companies and bring innovation in their traditional Chartered Accountants & Legal profession services, disrupt traditional Chartered Accountants practice mechanism & Lawyers.
Stay updated with all the latest legal updates. Just enter your email address and subscribe for free!
Chat on Whatsapp
Hey I'm Suman. Let's Talk!