Go Airlines (India) Ltd (Go First) said that it was filing for voluntary insolvency proceedings with the National Company Law Tribunal (NCLT)
What is insolvency?
- Insolvency is a state of financial distress for an individual or company.
- It occurs when that entity is no longer able to meet the financial obligations they have agreed upon with their lenders or creditors.
- When insolvency proceedings are initiated, the creditor who is not being paid properly may take legal action against the entity that has fallen behind on its payments.
- This can lead to liquidation of assets by the entity against whom the proceedings have been initiated, restructuring of debt, and damages to the entity’s credit rating.
What is voluntary insolvency?
- Voluntary insolvency means that the company has accepted its business is insolvent.
- It is a process in which the company says it cannot pay debts and needs help from someone to sort it out.
- When the company goes insolvent, it can proceed to voluntary liquidation.
- This process refers to the dissolution of a company with approval from shareholders and creditors of the company.
- It is a time-bound process which needs to be completed in 270 days from the date of commencement of Voluntary Liquidation.
SOURCE: THE HINDU, THE ECONOMIC TIMES, PIB