Quick Summary
IBC 2016 provides framework for time-bound insolvency resolution through NCLT. Key process: CIRP (180+90 days), moratorium protection, Committee of Creditors approval (66% majority), Resolution Professional management. Default threshold: ₹1 crore. Failed resolution leads to liquidation with prescribed distribution waterfall protecting worker and secured creditor interests.
What is Insolvency & Bankruptcy Code?
The Insolvency and Bankruptcy Code, 2016 (IBC) is a comprehensive legislation that consolidates and amends laws relating to reorganization and insolvency resolution of corporate persons, partnership firms, and individuals. The IBC aims to resolve insolvency in a time-bound manner, maximize asset value, promote entrepreneurship, and balance stakeholder interests.
IBC replaces multiple existing laws and provides a unified framework for insolvency resolution, ensuring speedy disposal of cases while maintaining commercial wisdom of creditors and protecting their economic interests. The Code covers corporate insolvency, individual insolvency, and cross-border insolvency matters.
Key Objectives of IBC:
- • Time-bound Resolution: Fast-track insolvency resolution process
- • Asset Value Maximization: Preserve and maximize asset value
- • Stakeholder Balance: Balance interests of all stakeholders
- • Credit Culture: Promote credit discipline and entrepreneurship
- • Economic Growth: Support ease of doing business
- • Unified Framework: Consolidate multiple insolvency laws
IBC Regulatory Framework
IBC establishes a comprehensive institutional framework including adjudicating authorities, insolvency professionals, information utilities, and regulatory oversight to ensure effective implementation of insolvency processes.
Key Institutions
- • National Company Law Tribunal (NCLT)
- • National Company Law Appellate Tribunal (NCLAT)
- • Insolvency and Bankruptcy Board of India (IBBI)
- • Insolvency Professional Agencies (IPAs)
- • Information Utilities (IUs)
- • Insolvency Professionals (IPs)
Regulatory Oversight
- • IBBI as primary regulator
- • Regulation of insolvency professionals
- • Oversight of insolvency processes
- • Information utility regulations
- • Professional standards and ethics
- • Disciplinary proceedings
Corporate Insolvency Resolution
Corporate Insolvency Resolution Process (CIRP) is the core mechanism under IBC for resolving corporate insolvency in a time-bound manner while maximizing asset value and ensuring stakeholder participation.
CIRP Process & Timeline
CIRP follows a structured timeline with specific milestones and deadlines to ensure swift resolution while providing adequate opportunity for stakeholder participation and decision-making.
CIRP Timeline:
- • Initial Period: 180 days from admission date
- • Extension: Additional 90 days with 66% CoC approval
- • Maximum Duration: 330 days including litigation time
- • Fast Track: 90 days for small companies (extendable by 45 days)
- • Moratorium: Throughout CIRP period
- • Liquidation: Automatic if no resolution plan approved
Role of Resolution Professional
Resolution Professional (RP) is a licensed insolvency professional who manages the corporate debtor during CIRP, conducts the process, and facilitates resolution plan preparation and approval.
Management Control
Take over management of corporate debtor and preserve assets
Stakeholder Coordination
Constitute Committee of Creditors and facilitate meetings
Process Management
Invite and evaluate resolution plans from prospective buyers
Committee of Creditors (CoC)
Committee of Creditors comprises all financial creditors and serves as the primary decision-making body during CIRP with powers to approve resolution plans and major process decisions.
NCLT Procedures & Jurisdiction
National Company Law Tribunal (NCLT) serves as the adjudicating authority for corporate insolvency matters with jurisdiction to admit applications, monitor processes, and approve resolutions or liquidations.
NCLT Procedures:
Creditor Rights & Remedies
IBC provides comprehensive rights and remedies to different classes of creditors including financial creditors, operational creditors, and secured creditors with specific protections and recovery mechanisms.
Financial Creditors
- • Voting rights in Committee of Creditors
- • Right to initiate CIRP under Section 7
- • Priority in distribution waterfall
- • Resolution plan approval rights
- • Asset sale approval powers
Operational Creditors
- • Right to initiate CIRP under Section 9
- • Demand notice procedure
- • Representation in creditor meetings
- • Claims verification process
- • Distribution rights in liquidation
Liquidation Process
Liquidation under IBC follows when no resolution plan is approved or circumstances warrant winding up, with prescribed distribution waterfall and liquidator powers to realize assets and distribute proceeds.
Distribution Waterfall (Section 53):
- 1. Insolvency resolution process costs and liquidation costs
- 2. Workmen dues for 24 months + provident fund contributions
- 3. Secured creditors (amount realized from security interest)
- 4. Wages and unpaid dues to employees (12 months)
- 5. Financial debts owed to financial creditors
- 6. Operational debts and other debts
- 7. Government dues including tax authorities
- 8. Remaining amount to equity shareholders or partners
Individual Insolvency Process
IBC provides separate framework for individual insolvency including personal guarantors to corporate debtors, partnership firms, and other individual debtors with simplified procedures and fresh start provisions.
IBC Compliance Requirements
IBC compliance involves adherence to procedural requirements, timeline adherence, professional conduct standards, and regulatory obligations for all stakeholders participating in insolvency processes.
Corporate Debtor Obligations
- • Provide access to books and records
- • Cooperate with Resolution Professional
- • Disclose material information
- • Comply with moratorium restrictions
- • Facilitate asset preservation
Professional Obligations
- • Maintain professional standards
- • Timely process completion
- • Regular stakeholder communication
- • Compliance with IBBI regulations
- • Continuing professional education
Professional IBC Services
Professional IBC services help stakeholders navigate complex insolvency processes, ensure regulatory compliance, and optimize outcomes in resolution or liquidation proceedings.
Return Filer IBC Services:
- ✓ CIRP application filing and representation
- ✓ Resolution plan preparation and structuring
- ✓ Creditor rights advisory and protection
- ✓ NCLT proceedings representation
- ✓ Due diligence for resolution applicants
- ✓ Liquidation process management
- ✓ IBC compliance audit and advisory
- ✓ Insolvency professional services
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Expert IBC Resolution Support
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