The Insolvency and Bankruptcy Code of India, 2016 (IBC, 16)

Overview of the Insolvency and Bankruptcy Code, 2016 (IBC)

The Insolvency and Bankruptcy Code, 2016 (IBC) is a comprehensive law enacted by the Parliament of India on May 28, 2016. It aims to consolidate and amend the laws relating to the reorganization and insolvency resolution of corporate persons, partnership firms, and individuals in a time-bound manner. The primary objectives are to maximize the value of assets, promote entrepreneurship, ensure the availability of credit, and balance the interests of all stakeholders including altering the order of priority of payment of government dues. The IBC also establishes the Insolvency and Bankruptcy Board of India to oversee the implementation of the Code.

Key Objectives of IBC

• Consolidation of Laws: The IBC consolidates multiple laws dealing with insolvency and bankruptcy into a single legislation.
• Time-bound Resolution: It aims for the resolution of insolvency cases within 180 days, extendable by another 90 days.
• Maximization of Asset Value: Ensuring that the assets of the debtor are maximized to benefit all stakeholders.
• Promoting Entrepreneurship: By providing a clear exit framework, it encourages entrepreneurship.
• Availability of Credit: By improving the credit culture, it ensures that credit is available to businesses.
• Balancing Interests: It balances the interests of all stakeholders including the alteration in the order of priority of payment of government dues.

Applicability

The provisions of the IBC apply to:

• Companies incorporated under the Companies Act, 2013 or any previous company law.
• Limited Liability Partnerships (LLPs).
• Individuals and partnership firms.
• Personal guarantors to corporate debtors.
• Other entities as notified by the Central Government.

Part I: Preliminary

Section 1: Short title, extent, and commencement

• The Code extends to the whole of India.
• It shall come into force on such date as the Central Government may appoint.

Section 2: Application

• Applies to companies, LLPs, personal guarantors to corporate debtors, partnership firms, and individuals.

Section 3: Definitions

• Defines terms such as Board, bench, bye-laws, corporate debtor, etc.

Part II: Insolvency Resolution and Liquidation for Corporate Persons

Chapter I: Preliminary

• Application of Part II relates to insolvency and liquidation of corporate debtors with a minimum default of one lakh rupees.

Chapter II: Corporate Insolvency Resolution Process

• Initiation, interim resolution professional, committee of creditors, resolution plan, etc.

Chapter III: Liquidation Process

• Appointment of liquidator, powers and duties, distribution of assets, etc.

Chapter III-A: Pre-Packaged Insolvency Resolution Process

• Applicable to micro, small, and medium enterprises.

Chapter IV: Fast Track Corporate Insolvency Resolution Process

• Process for a faster resolution.

Chapter V: Voluntary Liquidation of Corporate Persons

• Conditions and process for voluntary liquidation.

Chapter VI: Adjudicating Authority for Corporate Persons

• Powers of the National Company Law Tribunal (NCLT).

Chapter VII: Offenses and Penalties

• Punishments for fraudulent and wrongful trading, concealment of property, etc.

Part III: Insolvency Resolution and Bankruptcy for Individuals and Partnership Firms

Chapter I: Preliminary

• Application of Part III relates to fresh start, insolvency, and bankruptcy of individuals and partnership firms with a minimum default of one thousand rupees.

Chapter II: Fresh Start Process

• Eligibility and process for a fresh start.

Chapter III: Insolvency Resolution Process

• Initiation, interim resolution professional, repayment plan, etc.

Chapter IV: Bankruptcy Order for Individuals and Partnership Firms

• Adjudication, administration, distribution of estate, etc.

Chapter V: Administration and Distribution of the Estate of the Bankrupt

• Appointment of trustee, estate administration, etc.

Chapter VI: Adjudicating Authority for Individuals and Partnership Firms

• Powers of the Debt Recovery Tribunal (DRT).

Chapter VII: Offenses and Penalties

• Penalties for bankruptcy offenses.

Part IV: Regulation of Insolvency Professionals, Agencies, and Information Utilities

Chapter I: The Insolvency and Bankruptcy Board of India

• Establishment, powers, and functions of the Board.

Chapter II: Insolvency Professional Agencies

• Registration, functions, and obligations.

Chapter III: Insolvency Professionals

• Eligibility, registration, code of conduct.

Chapter IV: Information Utilities

• Registration, functions, and obligations.

Part V: Miscellaneous

Chapter I: Miscellaneous Provisions

• Includes provisions related to the application of other laws, bar of jurisdiction, and transfer of pending proceedings.

Chapter II: Amendment to Certain Enactments

• Amendments to Acts like the Companies Act, 2013, LLP Act, 2008, and others to align with IBC.