IBC is An Act, to consolidate and amend the laws relating to reorganization and insolvency resolution of corporate persons, partnership firms and individuals in a time bound manner for maximization of value of assets of such persons, to promote entrepreneurship, availability of credit and balance the interests of all the stakeholders including alteration in the order of priority of payment of Government dues and to establish an Insolvency and Bankruptcy Board of India, and for matters connected therewith or incidental thereto.

The Insolvency and Bankruptcy Code is a transformational piece of legislation as it seeks to establish an ecosystem for handling Insolvency & Bankruptcy issues. Most importantly it offers an exit plan to all categories of persons-Corporates, Stakeholders, Individuals and Partnership firms, apart from over hauling century old legal framework. Hence it is a game changer in which the Bankers, Courts, Investors and the initiators of insolvency proceedings will have to work in harmony for devising either a revival plan or liquidation of sick units and others facing debt default

The Insolvency and Bankruptcy Code ecosystem
Insolvency and Bankruptcy Board of India (IBBI)

IBBI is an apex body governing Insolvency and Bankruptcy Code. It has set up the necessary infrastructure and provide accreditation to Insolvency Professionals (IPs), Insolvency Professionals Agencies (IPAs), Information Utilities (IUs) and recognition to Insolvency Professional Entities (IPE).

Insolvency Professionals (IPs)

IPs- persons registered with IBBI and IPA. Regulated by IBBI and IPA will conduct resolution process; to act as Liquidator/bankruptcy trustee; appointed by creditors and override the powers of board of directors.

Insolvency Professional Agencies (IPAs) –

IPA registered with IBBI admits insolvency professionals as members

Information Utilities (IUs)

IU is a centralized repository of financial and credit information of borrowers; would accept, store, authenticate and provide access to financial data provided by creditors.

Adjudicating authority (AA) -

AA have exclusive jurisdiction to deal with insolvency related matters.

National Company Law Tribunal (NCLT) is AA for Corporate and LLP insolvency and National Company Law Appellate Tribunal (NCLAT) is Appellate Authority.

Debt Recovery Tribunal (DRT) is AA for Partnership and individual insolvency and Debt Recovery Appellate Tribunal (DRAT) is Appellate Authority.

Key Features

Insolvency Resolution: The Code outlines separate insolvency resolution processes for individuals, partnership firms, limited liability partnership and companies. The process may be initiated by either the debtor or the creditors. A maximum time limit, for completion of the insolvency resolution process, has been set for corporates and individuals. The resolution process will have to be completed in 180 days, which may be extended by 90 days, if a majority of the creditors agree.

Insolvency Regulator: The Code establishes the Insolvency and Bankruptcy Board of India, to oversee the insolvency proceedings in the country and regulate the entities registered under it.

Insolvency Professionals: The insolvency process will be managed by registered professionals. These professionals will also control the assets of the Corporate debtor during the insolvency process.

Insolvency Professional Entity:Under regulation 12 of IBBI (Insolvency Professionals) Regulations 2016, the IBBI recognises Insolvency Professional Entities, who shall be a limited liability partnership, a registered partnership firm or a company. The sole objective of the recognised IPEs is to provide support services to the Insolvency Professionals who are its partners or directors.

Bankruptcy and Insolvency Adjudicator: The Code proposes two separate tribunals to oversee the process of insolvency resolution, for individuals and companies: (i) the National Company Law Tribunal for Companies and Limited Liability Partnership and (ii) the Debt Recovery Tribunal for individuals and partnerships.

IBC 2016 Drafting Committee

Shri Narendra Modi, Hon’ble Prime Minister of India