What Is The Insolvency and Bankruptcy Code? What Are The Aims, Objectives, And The Procedure
The Insolvency and Bankruptcy Code is one of the many most extensive insolvency reforms brought forward by the parliament in November 2016, with the aim to welcome uniformity to the country’s scattered bankruptcy laws. The Insolvency and Bankruptcy Code got the assent of the president in May 2016. It was necessitated because of the increase in the non-performing assets of banks and the delay in debt resolution.
Aims Of The Insolvency and Bankruptcy Code
The Insolvency and Bankruptcy Code (IBC) intends to resolve the insolvency of corporations, partnerships, and individuals in a time-bound manner.
The chief objective of the Insolvency and Bankruptcy Code, 2016 is to offer a justified balance between
- The interest of all the stakeholders of the company, making them enjoy credit availability.
- The creditor’s loss that he might face as a result of the default
Objectives Of The Insolvency And Bankruptcy Code
The objectives of the Insolvency and bankruptcy code are manifold. The objectives are:
- To make the process of insolvency and bankruptcy proceedings in the country simple and quick
- To aid creditors who have been eager to get their payments for a long time get the needed relief
- To resolve the country’s problem of bad debt by creating a database of defaulters
- To establish a new and timely recovery procedure to be adopted by the financial institutions, individuals, and banks
- To establish an Insolvency and Bankruptcy Board of India as a regulatory board for insolvency and bankruptcy law
- To consolidate all the existing insolvency laws in India and make changes if required.
- To safeguard the interests of creditors, including that of the stakeholders in a company
- To revive a company timely
- To promote entrepreneurship
- To enhance and maximize the assets’ value
The Procedure To Resolve Insolvency Under The IBC Code
In the case of a defaulter, the debtor or creditor initiates the process of resolution. The insolvency professional is thus appointed to administer the process. The task of the appointed professional is to offer the debtors’ financial information to the creditor and manage the assets of the debtor. The resolution process lasts for 180 days. In this period of 180 days, any legal action against the debtor is prohibited.