Interim Finance – A Source of Operational Funding under IBC

Interim finance ?is defined as financial debt raised by Interim Resolution Professional/Resolution professionals, as the case may be, during Corporate Insolvency resolution processes according to the provisions of the Insolvency and Bankruptcy Code, 2016. The funds allow the insolvent company to remain operational and/or to meet the CIRP costs while undergoing the Corporate Insolvency Resolution Process (CIRP).?

The Security Factor:

Access to adequate cash is one of the most important factors in running insolvent enterprises or in successfully restarting the day-to-day operations of the Corporate Debtor and recent amendments in the Code, 2016 have made it simpler to get such funds. Under the Insolvency and Bankruptcy Code, interim financing, including accrued interest, has been accorded a higher priority than all other creditors' debts: it is considered a part of the cost of corporate insolvency resolution and takes precedence over other creditors.

Can an Interim Finance Provider create security Interest on the asset of the Corporate Debtor?

In section 20(2) of the Insolvency and Bankruptcy Code, 2016 it has been specified that “ (c) to raise?interim finance ?provided that no security interest shall be created over any encumbered property of the corporate debtor without the prior consent of the creditors whose debt is secured over such encumbered property:?

Provided that no prior consent of the creditor shall be required where the value of such property is not less than the amount equivalent to twice the amount of the debt.”

Read Full Article - Interim Finance