In continuation to our previous post, let us understand the key terms used under IBC
Corporate Person
Section 3(7) of IBC defines "corporate person" means -
a company defined in clause (20) of section 2 of the Companies Act, 2013
a limited liability partnership, as defined in clause (n) of sub-section (1) of section 2 of the Limited Liability Partnership Act, 2008 or
any other person incorporated with limited liability under any law for the time being in force
BUT SHALL NOT INCLUDE ANY FINANCIAL SERVICE PROVIDER
In Simpler Terms
A corporate person can be a company incorporated in India under the Companies Act, 2013 or an LLP incorporated under the LLP Act, 2008 or any person incorporated with limited liability under any law for the time being in force in India.
An important point to note here is that a financial service provider is excluded from the definition of Corporate Person.
Corporate Debtor
Section 3(8) of IBC defines "corporate debtor" means -
a corporate person who owes a debt to any person.
In Simpler Terms
A corporate debtor is a corporate person who has taken a debt from any person. As per IBC, person includes an individual, an HUF, a company, a trust, a partnership, an LLP and any other entity established under a statute. Important point here is person can be a financial service provider like bank, NBFC etc.
Corporate Applicant
Section 5(5) of IBC defines "corporate applicant" means -
corporate debtor; or
a member or partner of the corporate debtor who is authorised to make an application for the corporate insolvency resolution process (CIRP) under the constitutional document of the corporate debtor; or
an individual who is in charge of managing the operations and resources of the corporate debtor; or
a person who has the control and supervision over the financial affairs of the corporate debtor.
In Simpler Terms
A corporate applicant is a corporate debtor or any person who is either a member of the corporate debtor, authorised to make an application for CIRP, an individual who is in charge to manage the operations and resources of corporate debtor or a person who has the control over financial affairs of the corporate debtor.
Corporate Guarantor
Section 5(5A) of IBC defines "corporate guarantor" means -
a corporate person who is the surety in a contract of guarantee to a corporate debtor.
In Simpler Terms
A corporate guarantor is a corporate person who has provided a guarantee for a debt of a corporate debtor.
Creditor
Section 2(10) of IBC defines "creditor" means -
any person to whom a debt is owed and includes a financial creditor, an operational creditor, a secured creditor, an unsecured creditor and a decree-holder.
In Simpler Terms
A creditor is a person who lends money or supply goods / services on credit to a corporate debtor.
Financial Creditor
Section 5(8) of IBC defines "financial creditor" means -
any person to whom a financial debt is owed and includes a person to whom such debt has been legally assigned or transferred to.
In Simpler Terms
A financial creditor is a person who lends money to a corporate debtor. For example, banks and financial institutions are financial creditors.
Financial creditor also includes a person to whom a debt has been transferred. For example, asset reconstruction companies, which purchase debts or loans from banks are also financial creditors.
A detailed article on "What is debt" will be published shortly.
Operational Creditor
Section 5(20) of IBC defines "operational creditor" means -
a person to whom an operational debt is owed and includes any person to whom such debt has been legally assigned or transferred.
In Simpler Terms
An operational creditor is a person who has supplied goods, provided services including employment or has a claim of debt in respect of dues arising under any law for time being in force and payable to Central Government, any State Government or any local authority. Hence, payments due to employees or any Government Authority come under the purview of operational creditor.
This article intends to cover very basic terms you usually find when you read about Insolvency and Bankruptcy News, Articles or Case Laws. In coming articles we will delve deep into technical aspects of IBC.
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