Insolvency and Bankruptcy Code

Introduction

• The Insolvency and Bankruptcy Code (IBC) is a bankruptcy law that was passed in 2016 by the Parliament. It created a single law for bankruptcy by consolidating the previous frameworks and guidelines.
• The prime objective of the IBC is to protect corporate indebted individuals in trouble. It includes individuals, companies, and partnership firms. 

Objectives of IBC

• Better managing of conflicts between debtors and creditors: It can give procedural certainty about the bargaining process, reducing issues of common property and asymmetry of information for all economic parties.

• Set a boundary between deception and commercial failure: It can also give parties the freedom to choose the most cost-effective approach to maximize value during discussions. The bankruptcy law will provide a framework for negotiations between creditors and outside financiers, potentially allowing for such reorganizations.

• Losses from macroeconomic downturns must be borne by someone: The stereotype of “wealthy promoters of insolvent firms” emerges as a result of a shaky insolvency regime, leading to theories like:

Features of IBC

• Insolvency Regulator: The Code sets up the Bankruptcy and Insolvency Board of India, to supervise the bankruptcy procedures within the nation and direct the substances enrolled beneath it. The Board will have 10 individuals, counting agents from the ministries of Finance and Law, and the Reserve Bank of India.
• Insolvency Resolution: The Code tells about the partition of the process for people, companies and association firms. The method may be started by either the indebted person or the leaders. A most extreme time constraints, for completion of the insolvency determination preparation, has been set for corporates and individuals. For companies, the method will have to be completed in 180 days, which may be increased to 90 days, in case a larger part of the  leasing occurs. For starters, for little companies and other companies (with resources less than Rs. 1 crore), the process to prepare would be completed in 90 days from the initiation on request which may be expanded by 45 days.
• Insolvency Professional: The bankruptcy handle will be overseen by authorized experts. These experts will moreover control the resources of the indebted person amid the indebtedness process test which may be amplified by 45 days.