Question from Aditya, How does the Insolvency and Bankruptcy Code (IBC) 2016 in India provide the procedure to assign the properties of the Personal Guarantor?
Answer from AI:
The Insolvency and Bankruptcy Code (IBC) 2016 in India has provisions that deal with the insolvency and bankruptcy of personal guarantors to corporate debtors. These provisions outline the process for assigning the properties of a personal guarantor when a corporate debtor defaults on a loan.
What is a Personal Guarantor?
A personal guarantor is an individual who guarantees the repayment of a loan or other liability of a corporate debtor. If the corporate debtor defaults on the loan, the personal guarantor is responsible for repaying the debt.
Provisions under IBC 2016
Under the IBC 2016, the insolvency resolution process can be initiated against a personal guarantor if the corporate debtor defaults on a loan. The process is as follows:
- The creditor (usually a bank or financial institution) files an application to the adjudicating authority (National Company Law Tribunal, NCLT).
- The NCLT, after examining the application, can pass an order for the insolvency resolution process.
- An insolvency professional is appointed to take control of the guarantor’s assets and affairs.
- The insolvency professional prepares a repayment plan, which is then approved by the creditors and the NCLT.
- If the plan is approved, the guarantor’s assets are distributed according to the plan. If the plan is not approved, the guarantor may be declared bankrupt and their assets will be liquidated to repay the debts.
Legal Advice
The process of insolvency and bankruptcy can be complex and requires a thorough understanding of the IBC 2016 and other relevant laws. It is recommended that individuals consult with a legal professional for personalized advice.
References
For more information, you can refer to the Insolvency and Bankruptcy Code, 2016 and the Insolvency and Bankruptcy (Application to Adjudicating Authority for Insolvency Resolution Process for Personal Guarantors to Corporate Debtors) Rules, 2019.
Please note that this information is intended to provide a general understanding of the law. It is not intended to provide legal advice. Always consult with a legal professional for advice on your specific situation.
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