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CS Professional · Insolvency and Bankruptcy - Law and Practice · Pre-Packaged Insolvency Resolution Process (Elective 7.5)

The directors of Orion Components Pvt Ltd made the declaration under section 54A(2)(f) stating that an application would be filed within 120 days. The insolvency professional named as proposed resolution professional is preparing the report under section 54B. Which statement is correct?

The declaration is defective because section 54A(2)(f)(i) caps the filing period at ninety days, and 120 days exceeds it. Separately, under section 54B(2)(a), the professional's pre-initiation duties cease if the debtor does not file within the period stated in the declaration.

  1. AThe declaration is valid, because the Code lets directors choose any period
  2. BThe declaration does not meet the Code, because the definite period must not exceed ninety days; and if the debtor fails to file within the stated period, the professional's section 54B duties ceaseCorrect
  3. CThe declaration is valid, but the professional's duties continue indefinitely
  4. DThe declaration is invalid only because it was not made by all directors

Explanation

Section 54A(2)(f)(i) requires a definite period not exceeding ninety days, so 120 days is not permitted. Section 54B(2)(a) provides that the professional's duties cease if the debtor fails to file within the period stated in the declaration. The declaration needs only a majority of directors, not all.

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