Insolvency and Bankruptcy Code, 2016
Insolvency and Bankruptcy code ,2016 regulates laws relating to reorganization and insolvency of corporate persons, partnership firms, and individual. It enables maximization of value of assets and to promote entrepreneurship, availability of credit and balance the interests of all the stakeholders. It also enables establishment of an Insolvency and bankruptcy Board of India. The code extends to whole of India except the state of Jammu and Kashmir.
“…to strengthen further the insolvency resolution process, it has been considered necessary to provide for prohibition of certain persons from submitting a resolution plan, who, on account of their antecedents, may adversely impact the credibility of the processes.”
The Hindu, Article named ”Messy fix: the amended insolvency code” retrieved on 5th December 2017, original Article by The Hindu
The code covers the following persons:
- The companies governed under companies Act 2013.
- Any other company governed by any special Act.
- Any limited liability partnership governed by Limited Liability Partnership Act 2008.
- Such other body incorporated under any law for time being in force.
- Partnerships and Individuals.
The Insolvency and Bankruptcy code 2016 is connected to the the Financial Resolution and Deposit Insurance Bill, 2017 which covers the banking sector where as code covers corporate person , partnership firms, individuals etc.
Part II of Insolvency and Bankruptcy code 2016 covers following chapters:
I – shall apply to matters relating to the insolvency and also liquidation of corporate debtors where the minimum amount of the default is one lakh rupees provided government can notify minimum amount for default but more than one crore.
II – says that if any corporate debtor commits a default then a financial creditor, an
operational creditor or the corporate debtor itself may initiate corporate insolvency resolution
III – governs liquidation process of corporate, limited liability partnership, also the partnerships firms, individuals etc
IV– has provisions relating to Fast track corporate insolvency resolution process for resolving the problems relating to insolvency.
V – covers Voluntary Liquidation of corporate entities.
VI – gives details about the Adjudicating authorities for corporate person.
VII – covers Offences and also their penalties.
Part III Of Insolvency and Bankruptcy code ,2016 covers the following chapters:
I – shall apply to matters relating to fresh start, insolvency and bankruptcy
of individuals and partnership firms where the amount of the default is more than one thousand rupees provided government can notify the minimum amount for default but not more than one lakh rupees.
II – covers how can a partnership firm or individual initiate fresh start process.
III – governs insolvency resolution process for individuals and partnerships firms.
IV – regulates bankrucptcy orders given to individuals and partnership firms.
V – covers Administration and distribution of assets of a bankrupt.
VI – has provisions relating to Adjudicating Authority for Individuals and partnership firms.
VII -covers offences and their penalties.
Part IV of Insolvency and Bankruptcy code 2016 covers following chapters:
It covers regulation Of Insolvency of Professionals, agencies and Information utilities.
I – covers process of formulation of The Insolvency and Board of India.
II – allocates the powers and also functions to the board.
III – covers who can be insolvency professional agencies.
IV – covers provisions relating to Insolvency Professionals.
V – governs provisions relating to Information Utilities.
VI – covers provisions relating to Inspection and also investigation
VII – covers Finance Accounts and Audit.
Part V of Insolvency and Bankruptcy code 2016 only covers miscellaneous provisions.
- Insolvency Resolution process during which financial creditors assess whether the debtor’s business is viable to continue and the options for its rescue and revival.
- If the insolvency resolution process does not work then creditors can go for liquidation process.
- Companies have to complete the insolvency process within 180 days and it can be extended if creditors do not object.
- Insolvency and Bankruptcy Board of India has been appointed as a regulator and has 10 members from Finance Ministry and Law Ministry the Reserve Bank of India.
- National Company Law Tribunal and the Debt Recovery Tribunal are two authorized tribunals.
- The creation of information utilities to collect, collate, authenticate and also disseminate financial information of debtors in centralized electronic databases.