Corporate Restructuring, Insolvency, Liquidation & Winding Up
Company Secretary (CS) Professional Programme - Module 2, Paper 5
Corporate Restructuring, Insolvency, Liquidation & Winding Up:
RESTRUCTURING is the corporate management term for the act of reorganizing the legal, ownership, operational, or other structures of a company for the purpose of making it more profitable, or better organized for its present needs. Other reasons for restructuring include a change of ownership or ownership structure, demerger, or a response to a crisis or major change in the business such as bankruptcy, repositioning, or buyout. Restructuring may also be described as corporate restructuring, debt restructuring and financial restructuring.
INSOLVENCY is the state of being unable to pay the money owed, by a person or company, on time; those in a state of insolvency are said to be insolvent. There are two forms - Cash-flow insolvency and Balance-sheet insolvency. Cash-flow insolvency involves a lack of liquidity to pay debts as they fall due. Balance sheet insolvency involves having negative net assets—where liabilities exceed assets. Insolvency is not a synonym for bankruptcy, which is a determination of insolvency made by a court of law with resulting legal orders intended to resolve the insolvency. Accounting insolvency happens when total liabilities exceed total assets (negative net worth).
LIQUIDATION is the process by which a company is brought to an end. The assets and property of the company are redistributed. Liquidation is also sometimes referred to as winding-up or dissolution, although dissolution technically refers to the last stage of liquidation. Liquidation may either be compulsory (sometimes referred to as a creditors' liquidation) or voluntary (sometimes referred to as a shareholders' liquidation, although some voluntary liquidations are controlled by the creditors).
As per new syllabus 2018, it is covered under Company Secretary (CS) Professional Programme in Module 2, Paper 5- CORPORATE RESTRUCTURING, INSOLVENCY, LIQUIDATION & WINDING UP.
- Level of Knowledge: Expert Knowledge
- Objective of ICSI:
- Part I: To provide expert knowledge of legal, procedural and practical aspects of Corporate Restructuring, M & A, Insolvency, Liquidation & Winding-up.
- Part II: To acquire knowledge of the legal, procedural and practical aspects of Insolvency and its resolution.
- Mode of examination: Written based. (Case Laws, Case Studies & Practical Aspects)
- 100 Marks Paper:
|Part A: Corporate Restructuring||Part B: Insolvency & Liquidation|
|50 marks||50 marks|
|Types of Corporate Restructuring:
Key definitions, Compromises, Arrangements, Mergers & Amalgamations; Demergers & Slump Sale, Business Sale; Joint Venture, Strategic Alliance, Reverse Merger Disinvestment; Financial Restructuring (Buy-back, Alteration & Reduction).
Historical Background; Pillars of IBC, 2016 [IBBI, IPA, IP, AA, Information Utility]; Key Definitions and Concepts; Insolvency Initiation/Resolution under sections 7, 8 and 10.
|Acquisition of Company/ Business:
Acquisition of Company; Takeover of Listed Companies(i) Legal Framework (ii)Process & Compliances; Cross Borders Takeovers – Procedure.
|Petition for Corporate Insolvency Resolution Process:
Legal Provisions; Procedure, Documentation; Appearance, Approval; Case Laws.
|Planning & Strategy:
Case Studies pertaining to Merger, Amalgamation, Restructuring; Funding for M&A, Studies of Judicial pronouncements; Planning relating to acquisitions & takeovers; Protection of minority interest; Succession Planning; Managing Family Holdings through Trust.
|Role, Functions and Duties of IP/ IRP/ RP:
Public announcement, Management of affairs and operations of company as a going concern, Raising of Interim Finance, Preparation of Information Memorandum.
|Process of M&A transactions:
Key Concepts of M&A; Law & Procedure; M&A Due Diligence; M&A Valuation; M&A Structure finalization; Post transaction integration.
Restructuring of Equity & Debt; Compromise & Arrangement; Acquisition, Takeover & Change of Management; Sale of Assets; Valuation.
Drafting of Scheme; Drafting of Notice and Explanatory Statement; Drafting of application & Petition.
|Convening and Conduct of Meetings of Committee of Creditors:
Constitution of Committee of Creditors; Procedural aspects for meeting of creditors.
|Valuation of Business and Assets for Corporate Restructuring:
Type of Valuations; Valuation Principles & Techniques for Merger, Amalgamation, Slump Sale, Demerger; Principles & Techniques of Reporting; Relative valuation and Swap ratio.
|Preparation & Approval of Resolution Plan:
Contents of resolution plan; Submission of resolution plan; Approval of resolution plan.
|Accounting in Corporate Restructuring—Concept and Accounting Treatment:
Methods of Accounting for Amalgamations - AS-14/ IndAS 103;Treatment of Reserves, Goodwill; Pre-Acquisition & Post-Acquisition Profit; Accounting in Books of Transferor and Transferee; Merger and De-Merger; Acquisition of Business and Internal Reconstruction.
|Individual/ Firm Insolvency:
Application for insolvency resolution process; Report of resolution professional; Repayment plan; Discharge Order.
|Taxation & Stamp Duty aspects of Corporate Restructuring:
Capital Gain; Set-off and carry forward under section 2(14) of Income Tax Act; Deemed Dividend; Payment of Stamp Duty on scheme, payment of stamp duty on movable and immovable properties.
|Fresh Start Process:
Person eligible to apply for fresh start; Application for fresh start order; Procedure after receipt of application; Discharge order.
Regulation of combinations under the competition Act, Kinds of combinations, Exempted combinations, Concept of relevant market and its importance, Determination of combinations and any appreciable adverse effect, Role of CCI.
|Debt Recovery & SARFAESI:
Non-Performing Assets; Asset Reconstruction Company; Security Interest (Enforcement) Rules, 2002;Evaluation of various options available to bank viz. SARFASEI, DRT, Insolvency Proceedings; Application to the Tribunal/ Appellate Tribunal.
|Regulatory approvals of scheme:
From CCI, Income Tax, Stock Exchange, SEBI, RBI, RD, ROC, OL and Sector Regulators such as IRDA, TRAI etc.
|Cross Border Insolvency:
International Perspective and Global Developments; UNCITRAL Legislative Guide on Insolvency Laws; US Bankruptcy Code, Chapter 11 reorganization; Enabling provisions for cross border transactions under IBC.
|Appearance before NCLT / NCLAT.||Liquidation on or after failing of RP:
Initiation of Liquidation; Distribution of assets; Dissolution of corporate debtor.
|Fast Track Mergers:
Small companies, Holding and wholly owned companies.
Procedure for Voluntary Liquidation; Powers and duties of the Liquidator; Completion of Liquidation.
|Cross Border Mergers.||Winding-up by Tribunal under the Companies Act, 2013:
Procedure of Winding-up by Tribunal; Powers and duties of the Company Liquidator; Fraudulent preferences.