Experts ring alarm bells as U.S. firms file bankruptcies

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Experts ring alarm bells as U.S. firms file bankruptcies

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Indian suppliers should file their claims at the right time and it’s their duty, says lawyer

With major companies filing for bankruptcy in the U.S., amid the COVID-19 pandemic, Indian exporters supplying materials to them should be aware of their rights and file their claims, according to experts.

Some of the major U.S. retailers and companies like J.C. Penney, Neiman Marcus, J. Crew, Gold’s Gym, True Religion Apparels, among others, have filed for bankruptcy under Chapter 11 (a.k.a Reorganization Bankruptcy) of the United States Bankruptcy Code in the past few months.

“The U.S Bankruptcy Code provides for a notification to be given to the foreign creditors, which also mentions the details on how and where to file, along with timelines. The foreign creditors are not discriminated under the U.S Bankruptcy Laws, except for certain tax claims or which may be governed by a treaty,” Anant Merathia, a Chennai-based corporate lawyer said.

Mr. Merathia has helped three of his clients file their claims with the bankruptcy trustee of these U.S. companies undergoing the Chapter 11 bankruptcy process.

“Filing of claims is both a legal right and duty of the creditors who in this specific case are Indian suppliers and exporters who would be affected by these bankruptcies especially if their claims are not scheduled in the debtor’s schedules or are disputed, contingent or unliquidated,” he said.

If the claims of a creditor were part of the debtor’s schedule it need not be filed separately. However, a properly filed claim would supersede any claim in the schedules. A claim would provide a sense of certainty on part of the creditor rather than merely relying on the debtor’s schedules, Mr. Merathia said.

There were chances that Chapter 11 insolvency might be discharged in the initial stages or where a Chapter 11 insolvency might be per packed with its key creditors. However, it was important that claims were filed at the right time and given the advantage of technology, creditors could file online, he said.

Mr. Merathia pointed out that many Indian companies might assume the amounts owed by the U.S. companies in the bankruptcy process as a write-off, but an awareness of the process and being a part of it couldE help them and give a ray of hope.

“It is advisable for Indian creditors/suppliers/exporters to submit a proof of their claim and monitor the proceedings. There might just be a favourable reorganisation plan which may be approved, paying unsecured creditors,” he said.

Source- The Hindu.

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