Insolvency and Bankcrupty Code
- There was no economically viable alternative to the lengthy process needed to resolve insolvencies before the Insolvency and Bankruptcy Code (IBC). The IBC aims to simplify company operations while defending the interests of small investors. The IBC consists of 255 components and 11 schedules.
What exactly is the Bankruptcy and Insolvency Code?
- India’s bankruptcy law, the Insolvency and Bankruptcy Code, 2016 (IBC), seeks to harmonise the current framework by introducing an unified insolvency and bankruptcy law.
- A debtor who is unable to pay their debts back is said to be insolvent.
- When a person or business is bankrupt and unable to pay their debts, they petition for bankruptcy.
- It provides clearer and faster insolvency procedures to help creditors, such banks, collect debts and stop bad loans, which have a significant negative impact on the economy.
- It is a comprehensive insolvency law that is applicable to all corporations, partnerships, and people (other than financial firms).
The 2016 Insolvency and Bankruptcy Code:
- The law repealed all prior restrictions and provided a uniform framework for handling bankruptcy and insolvency issues.
- It helps creditors to evaluate a debtor’s ability to conduct business. Creditors may also push for the company to be quickly liquidated or for its rebirth.
A new legal structure is established by the Code. This tactic helped to streamline the formalisation and conclusion of a time-limited insolvency resolution process. The following components make up the framework:
- They are in charge of the resolution process and are insolvency experts. They also look after the debtor’s assets and give creditors information to aid in decision-making.
- Professional Organizations for Insolvency: Insolvency practitioners will be registered with professional organisations for insolvency. To certify insolvency professionals, tests would be offered, and the agencies would establish a code of conduct for their work.
- All payments made to creditors, late payments, and defaults on debt will be noted. informative resources.
- Adjudicating authorities: They will approve the resolution process, select the insolvency expert, and confirm the creditors’ ultimate decision.
- Corporations and limited liability companies can appeal decisions to the National Company Law Tribunal (NCLT).
- Decisions are made by the Debt Recovery Tribunal on the debts of both partnerships and individuals (DRT).
- The professional associations, information services, and insolvency professionals established in accordance with the Code are under the control of the Insolvency and Bankruptcy Board.
The goals of the Insolvency and Bankruptcy Code are:
- The current insolvency rules in India need to be consolidated and updated.
- The bankruptcy and insolvency process in India has to be streamlined and accelerated.
- To protect creditors’ interests, including those of the business’s stakeholders.
- the business’s fast revival.
- To promote business creation, offer creditors the assistance they require, and eventually increase the amount of credit accessible in the economy.
- To create a fresh and effective rehabilitation method that both individuals and businesses can adopt.
- To create a Board of Insolvency and Bankruptcy in India.
- The improvement of a company’s asset worth.
