The document summarizes key aspects of the Insolvency and Bankruptcy Code introduced in India in 2016. It outlines the process for initiating a corporate insolvency resolution process (CIRP) by financial creditors, operational creditors, or the corporate debtor itself. It describes the roles of the interim resolution professional, committee of creditors, and resolution plans. The document also discusses liquidation processes if no resolution plan is approved, including the liquidator inviting claims, verifying claims, and distributing assets according to priority. It concludes by noting companies can opt for voluntary liquidation and are dissolved once winding up is complete.
2. Insolvency and Bankruptcy Code was introduced
in 2016.
Provides with a mechanism to initiate an
insolvency resolution process in the event a
debtor is unable to pay its debts or if the
Company on its own wants to liquidate itself.
Initiation of CIRP at the behest of Financial
Creditor (Section 7)
3. Initiation of CIRP at the behest of Operational
Creditor subject to issuance of demand letter
(Section 8)
Initiation of CIRP at the behest of the
Corporate Debtor (Section 10)
Moratorium declared under Section 13
Interim Resolution Professional is appointed
under Section 16
4. IRP constitutes a Committee of creditors
(‘CoC’).
An Information memorandum is prepared
(section 29)
Resolution Plans are submitted by applicants,
one of which is approved by CoC and
subsequently by the NCLT. (Section 30)
5. However, if no resolution plan is received or
approved by NCLT, order for liquidation is
passed and a Liquidator is appointed. (Section
33)
Invitation of Claims by the Liquidator
After verification, the Liquidator can accept or
reject the claims.
6. Duty of Liquidator – to carry out effective
valuation of all claims and assets and liquidate
the Corporate Debtor accordingly.
Order of priority of debts is also established
under the code. (Section 53) (Also known as the
Waterfall Mechanism)
A Company can also opt for voluntary liquidation.
(Section 59)
Once the affairs of the Company have been
wound up and assets liquidated, the company is
dissolved by an order of the Adjudicating
Authority.
