IBC (Insolvency and Bankruptcy Code) is one of the biggest insolvency reforms implemented by the government in November 2016. It was primarily to bring uniformity to India’s bankruptcy laws, which were unsystematic and scattered at that time.
What is IBC and what does it aim to do?
IBC aims to reorganize and resolve the insolvency of individuals, partnerships, and corporations in a time-bound manner.
The fundament objective of IBC or Insolvency and Bankruptcy Code, 2016 is to provide a justified balance between the loss that a creditor might face because of the default, and the interest of every stakeholder of the company so that they can enjoy credit availability. It is a tool for the management of npa in india.
Objectives of IBC
- It works towards consolidating all existing insolvency laws in India making necessary amendments if required.
- It works towards making the process of Insolvency and Bankruptcy Proceedings in India fast and simple. It is part of the fundamental npa services in India.
- It works towards protecting the interests of creditors.
- It works towards helping creditors who have been waiting for the payments for a long time.
- It works towards reviving the company.
Apart from that, IBC also promoted entrepreneurship. It also creates a new and timely recovery procedure that can be adopted by banks, individuals, and financial institutions.
Who can file an application under IBC?
To initiate the insolvency process, financial creditors, operational creditors, and corporate debtors can file a petition in front of the National Company Law Tribunal or NCLT.
Companies have up to 180 days to complete the insolvency exercise under the IBC. But the deadline can be extended if the creditors do not object to it.
The IBC proceedings are regulated by the Insolvency and Bankruptcy Board of India (IBBI). This board has 10 members from the Law Ministry, Finance Ministry, and the Reserve Bank of India to administer the proceedings.
IBC is an important step in limiting and regulating npa in india.
The procedure of IBC
The debtor or creditor initiates the resolution process when a default takes place. The insolvency professional is appointed to administer the process. The process of resolution lasts for 180 days. Any legal action during that period is prohibited.
IBC is a comprehensive legislation and since it has a simple and speedy process to deal with insolvency issues, it can act as one of the important npa services in India.