The Insolvency and Bankruptcy Code, 2016 (IBC) is the bankruptcy law of India which is unified code of all insolvency and bankruptcy laws relating to individual, partnership firm, HUF, LLP and Company. The code is compilation of law relating to insolvency and bankruptcy.
The Insolvency and Bankruptcy Code was passed by Lok Sabha on 05th May,2016 and got the President’s assent on 28th May, 2016. However, the provisions relating to Corporate in the Code, i.e., Limited Liability Partnerships and Companies is notified and in force w.e.f. 1st December, 2016. The provisions related to Individuals and Unlimited Partnership Firms – the Part III of IBC, 2016 is yet to be notified.
APPLICABILITY OF CODE :
This Code extends to the whole of India, Provided that Part III of this Code which relates to provisions relating to individuals and Unlimited Partnership firms shall not extend to the State of Jammu and Kashmir.
The provisions of this Code shall apply to—
(a) any company incorporated under the Companies Act, 2013 or under any previous company law;
(b) any other company governed by any special Act for the time being in force, except in so far as the said provisions are inconsistent with the provisions of such special Act;
(c) any Limited Liability Partnership incorporated under the Limited Liability Partnership Act, 2008;
(d) such other body incorporated under any law for the time being in force, as the Central Government may, by notification, specify in this behalf; and
(e) partnership firms and individuals, in relation to their insolvency, liquidation, voluntary liquidation or bankruptcy, as the case may be.
Establishment of Insolvency and Bankruptcy Board of India (IBBI)
The Code establishes the Insolvency and Bankruptcy Board of India (IBBI), itis a Regulatory Authority which regulate the law and registered entities under it and to bring Rules and Regulations, amendments, notifications in the Code.The Board will consist of members, including representatives from the Ministry of Corporate Affairs, Ministries of Finance and Law, and the Reserve Bank of India.
IBBI would regulate the appointment of insolvency professionals, information utilities and promote transparency in governance. The board will also make model bye laws for regulating insolvency professionals.
The Insolvency and Bankruptcy Board of India (IBBI) was established on October 1, 2016 in accordance with the provisions of The Insolvency and Bankruptcy Code, 2016.Currently, Dr. M. S. Sahoo serves as Chairperson of The Insolvency and Bankruptcy Board of India.
Diagrammatical Presentation and meaning of registered entities under IBBI :
Insolvency and Bankruptcy Board of India (IBBI)
(Representative of MCA, Ministry of Finance and RBI)
1. Insolvency Professional Agency (IPA) means any person registered with the Board as Insolvency Professional Agency. It is a body of Insolvency Professionals (IPs).
Eligibility for Registration as an Insolvency Professional Agency (IPA) is prescribed under Regulation 3of the Insolvency and Bankruptcy Board of India (Insolvency Professional Agencies) Regulations, 2016.
IPA is the body that would admit insolvency professionals (IPs) as members and develop a code of conduct and promote transparency and best practices in governance.
Information utilities are specialized licensed bodies which would collect, maintain and disseminate information relating to the indebtedness of companies, LLPs etc.
Adjudicating Authority (i.e. National Company Law Tribunal & Debt Recovery Tribunal) is a body that would have exclusive jurisdiction to deal with insolvency-related matters. The Code provides for application to be made to the appellate tribunal (i.e. National Company Law Appellate Tribunal & Debt Recovery Appellate Tribunal) for an appeal against the order of an Adjudicating Authority(NCLT & DRT).
NCLT would deal with the matters relating to Corporate insolvency, LLP and enforcement of personal Guarantee. Whereas DRT would deal with individual insolvency and partnership.
Presently there are three IPAs:
1. Indian Institute of Insolvency Professionals of ICAI
2. ICSI Insolvency Professionals Agency
3. Insolvency Professional Agency of Institute of Cost Accountants of India
Insolvency and Bankruptcy Board of India (Information Utilities)
Regulations, 2017shall come into force on 1st April, 2017
2. Insolvency Professionals (IPs):
IPs are licensed professionals appointed by insolvency professional agencies (IPAs) who would take on the roles of Resolution Professional or Liquidator/ Bankruptcy Trustee in an insolvency resolution process.
Persons who fulfill the criteria of Regulation 4, 5 or 9 of Insolvency and Bankruptcy Board of India (Insolvency Professionals) Regulations, 2016 are eligible to get registered as Insolvency Professionals(IPs)under Insolvency Professional Agencies.
ROLES OF IPs
– Insolvency Professionals (IPs) will play the role of Resolution Professional to resolve the insolvency of corporate debtorby selling out non-core assets of the company.
– Insolvency Professionals (IPs) play the role of Liquidators.
– IPs will replace the Board of directors of the Corporate Debtor and to manage and control the affairs of the Corporate Debtor to resolve insolvency.
Default and ‘Proof of default’ :
‘Default’ is defined as the state when debt exceeding Rs. 1 lakh is due and is not repaid by the Corporate debtor. Such cash flow-based assessment of insolvency can lead to an early detection of insolvency trends compared to the net worth or balance sheet based assessments prescribed in the existing laws.
Proof of default for Financial creditors is the default recorded with the information utility or such other proof of default as may be specified by the Code.
Process of Appointing Resolution Professional and their duties to be carried out for resolving the Insolvency will be in next Article
Prepared By : CS NISHI