IAn Act to consolidate and amend the laws relating to reorganisation and insolvency resolution of corporate persons, partnership firms and individuals in a time bound manner for maximisation of value of assets of such persons, to promote entrepreneurship, availability of credit and balance the interests of all the stakeholders

1. INSOLVENCY AND
BANKRUPTCY CODE, 2016

2. Understanding the Code
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Insolvency is
the inability of a
person or
corporation to pay
their bills as and
when they become
due and payable. Liquidation
is the
process of
winding up
a
corporation
or
incorporate
d entity.
Bankruptcy is
when a person
is declared
incapable of
paying their
due and
payable bills.
Differentiation
- Insolvency;
- Bankruptcy; and
- Liquidation
Why is it a Code?
“Code” is usually known as a
collection or compendium of
laws. It refers to a systematic
and comprehensive
compilation of laws, rules or
regulations that are
consolidated and classified
according to a particular
subject matter.

3.  Consolidate and amend all existing insolvency laws in India.(Sick
Industrial Companies (Special Provisions) Act, 1985, The Recovery of
Debts Due to Banks and Financial Institutions Act, 1993, The
Securitization and Reconstruction of Financial Assets and
Enforcement of Security Interest Act, 2002, The Companies Act, 2013)
 To simplify and expedite the Insolvency and Bankruptcy Proceedings
in India.
 To protect the interest of creditors including stakeholders in a
company.
 To revive the company in a time-bound manner.
 To promote entrepreneurship.
 To get the necessary relief to the creditors and consequently increase
the credit supply in the economy.
 To work out a new and timely recovery procedure to be adopted by
the banks, financial institutions or individuals.
 To set up an Insolvency and Bankruptcy Board of India.
 Maximization of the value of assets of corporate persons.

4. JOURNEY OF THE IBC
 21.12.2015- IBC Bill of 2015 -introduced in LS
 23.12.2015 - IBC Bill of 2015 - Referred to Joint
Committee of both Houses of Parliament
 28.04.2016- IBC Bill of 2015 -Joint Committee
placed its Report to both Houses of Parliament
 05.05.2016- IBC Bill of 2015 -passed by LS
11.05.2016- IBC Bill of 2015 -passed by RS
 28.05.2016- IBC, 2016 -Assented by President of
India & Notified

5. Applicability, Scope & Structure
Applicability STRUCTURE
In entirety, the Code has 255 sections which are
divided into 5 Parts as given below
Part
Preliminary
(Definitions)
Part II
Insolvency
Resolution and
Liquidation for
Corporate
Persons
Part III
Insolvency
Resolution and
Bankruptcy for
individuals and
Partnership
Firms
Part IV
Regulation of
Insolvency
Professionals,
Agencies and
Information
Utilities
Part V
Miscellaneous
(enables
amendments in
other statues
such as
Companies Act
2013)
Schedules
(11 Schedules)
Provides for
amendments to
be carried out
in other statues
All kinds of:
- Corporate Enterprises;
- Limited Liability Partnerships;
- Partnership Firms; and
- Individuals.
Scope
- Insolvency;
- Liquidation;
- Voluntary Liquidation (solvent
insolvency); and
- Bankruptcy

6. Framework of the Code
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Regulator Adjudicator
Insolvency and Bankruptcy Board of
India (IBBI)
National Company
Law Tribunal
Debt Recovery
Tribunal
Corporate
Entities
Non-Corporate
Entities
Companies/LLPs Individuals and
Partnership Firms
 Insolvency Professional Agencies;
 Insolvency Professionals; and
 Information Utilities

7. APPLICABILITY OF IBC,2016
 Any Company incorporated under the Companies Act, 2013
or under any provisions of previous Acts
 Any other Company governed by any Special Act
 Any LLP incorporated under the LLP Act, 2008
 Any other body, as notified by the Central Government
 Partnership Firms
 Individuals

8. WHO CAN INVOKE?
Corporate Debtor (Sec.10)
- A corporate person who owes a debt to any person
Operational Creditor (Sec.9)
- A person to whom an operational debt is owed &
- Includes any person to whom such debt legally assigned or transferred
Financial Creditor (Sec.7)
- Any person to whom a financial debt is owed &
- Includes a person to whom such debt legally assigned or transferred

9. DEFAULT
In case of Co. & LLP In case of Partnership & Individual
Minimum amount of ` 1 lakh Minimum amount of ` 1 thousand
Minimum amount of ` 1 lakh & ` 1 thousand can be increased upto ` 1 Cr & ` 1
lakh respectively by CG
Where any Company or LLP commits-
A default in paying its
Financial debt Operational debt
Then a financial creditor/ operational creditor/ Company & LLP itself
May file an application, for initiating corporate insolvency resolution process with
the Adjudicating Authority.

10. SCHEME UNDER THE CODE

11.  NCLT
- Deal with insolvency matters of Co. & LLP
- Appeal to NCLAT
 Debt Recovery Tribunal
- Deal with insolvency matters of individual & Partnership firm
- Appeal as to DRAT
Adjudicating Authority within 14 days of receipt of application, by an order -
Admit the application Reject the application
If it is complete
If it is
incomplete
Adjudicating Authority shall before rejecting application, give notice to
applicant to rectify defects in application within 7 days from the date of
receipt of such notice
Default
occurred
Default not
occurred

12. Moratorium
 When can NCLT (national company Law Tribunal)declare Moratorium?
 What does Moratorium (temporary suspension of an activity or law) includes:
a) the institution of suits or continuation of pending suits or proceedings against the
corporate debtor including execution of any judgement, decree, or order in any court
of law, tribunal, arbitration panel or other authority.
b) transferring, disposing off by the corporate debtor any of its assets or any legal right
or beneficial interest therein.
c) any action to foreclose, recover or enforce any security interest created by the
corporate debtor in respect of its property including any action under the SARFAESI
Act, 2002.
d) recovery of any property by an owner or lessor where such property is occupied by
or in the possession of the corporate debtor.

13. Moratorium shall cease to be in effect:
on completion of CIRP (Corporate insolvency
Resolution Process); or
when resolution plan is approved by NCLT
during the CIRP period; or
- where liquidation order is passed

14. Interim Resolution Professional (“IRP”)
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NCLT shall appoint an IRP within fourteen days from the insolvency commencement date.
From the date of appointment of the IRP-
the management of the affairs of the corporate debtor shall vest in the IRP;
the powers of the board of directors or the partners of the corporate debtor,
shall stand suspended and be exercised by the IRP;
Role of IRP
the officers and managers of the corporate debtor shall report to the IRP and
provide access to documents of the corporate debtor as may be required by
IRP
the financial institutions maintaining accounts of the corporate debtor shall
act on the instructions of IRP in relation to such accounts and furnish all
information relating to the corporate debtor available with them to the
interim resolution professional.
The interim resolution professional shall make every endeavor to protect
and preserve the value of the property of the corporate debtor and manage
the operations of the corporate debtor as a going concern.

15. Duties of IRP
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From the date of appointment of the IRP-
collect all information relating to the assets, finances and operations of the
corporate debtor for determining the financial position of the corporate
debtor
receive and collate all the claims submitted by creditors to him, pursuant to
the public announcement made;
constitute a committee of creditors
file information collected with the information utility.
take control and custody of any asset over which the corporate debtor has
ownership rights as recorded in the balance sheet of the corporate debtor, or
with information utility or the depository of securities or any other registry
that records the ownership of assets
The personnel of the corporate debtor, its promoters or any other person associated with the
management of the corporate debtor shall extend all assistance and cooperation to IRP
The interim
resolution
professional shall
after collation of all
claims received
against the corporate
debtor and
determination of the
financial position of
the corporate debtor,
constitute a
committee of
creditors

16. Powers of IRP
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IRP has been vested with the powers to-
Appoint accountants, legal counsels who may provide specialist advice to the
IRP;
Enter into contracts on behalf of the corporate debtor or to amend/ modify
the contracts which were entered into before the commencement of the CIRP;
Raise interim finance;
Issue instructions to the personnel of the corporate debtor to keep the
corporate debtor as a going concern;
Take all such actions as are necessary to keep the corporate debtor as a going
concern.
IRP has to manage the operations of the corporate debtor as a going concern to
enable him to protect and preserve the value of the property of the corporate
debtor.
The IRP may sell
unencumbered
assets of the
corporate debtor,
other than in the
ordinary course of
business, if he is of
the opinion that such
a sale is necessary
for a better
realization of value.

17. Public Announcement
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 When a public announcement shall be given?
 An insolvency professional shall make a public announcement in Form A within 3 days
from the date of his appointment as an IRP (interim Resolution Professional).
 The public announcement shall be published –
i. In one English and one regional language newspaper with wide circulation at the
location of the registered office and principal office;
ii. On the website of corporate debtor
iii. On the website, if any, designated by the Board for the purpose

18. Role of IRP/RP in Insolvency Resolution Process for Corporate Persons
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Public
Announcement by
IRP within 3 days of
his appointment in
FORM A.
Submission of Proof of
Claims by creditors,
workmen and employees
to IRP in FORMs B,C,D,E
as may be applicable.
Verification of Claims
by IRP within 7 days of
receipt
Constitution of
Committee of
Creditors (“COC”)
Where corporate debtor
has no financial debt, COC
shall consist of-
• 18 largest operational
creditors by value
• 1workmen
representative
• 1 employee
representative
IRP to file Report
certifying constitution of
COC to NCLT within 30
days of his appointment
IRP to convene first
meeting of COC within 7
days of filing the report
IRP to appoint 2 registered
valuers within 7 days of his
appointment to determine
the liquidation value of
corporate debtor
IRP shall provide the
Liquidation value to COC in
electronic form
IRP/RP shall submit
Information Memorandum in
electronic form to each
member of COC
RP shall present all Resolution
plans that meet requirements
of Code to COC for its
consideration
RP on instruction of COC may
apply for Extension of CIRP
period before NCLT.
By sending pdf file to
public.ann@ibbi.gov.in

19. Resolution Professional (“RP”)
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The committee of creditors, may, in the first meeting, by a majority vote of not less than 75% of the voting share of
the financial creditors, either resolve to appoint IRP as RP or to replace IRP by another RP.
RP shall conduct the entire Corporate Insolvency Resolution Process (“CIRP”) and manage
the operations of the corporate debtor during CIRP period;
The RP shall give notice of each meeting of the committee of creditors to— (a) members of
Committee of creditors; (b) members of the suspended Board of Directors or the partners of
the corporate persons (c) operational creditors or their representatives if the amount of their
aggregate dues is not less than ten per cent of the debt.
Duties of RP
Preserve and
protect the assets
of the corporate
debtor, including
the continued
business
operations of the
corporate debtor
The RP shall prepare
an information
memorandum
containing relevant
information
The RP shall
submit the
resolution plan as
approved by the
committee of
creditors to the
Adjudicating
Authority.
Initiation of
Liquidation

20. Waterfall Mechanism
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Insolvency resolution and liquidation cost
Secured creditor (in case he has
relinquished(give up) security)
Wages and unpaid dues to employees (other than workmen) for a period of 12
months preceding liquidation commencement date
Unsecured creditors
Central and State government dues
Any remaining debts or dues
Preference shareholders, if any
Equity shareholders or partners, as the case may be
Workmen’s dues ( for period of 24
months preceding liquidation
commencement date)
+
In case of
liquidation, the asset
of the corporate
debtor will be sold
and the proceeds
will be distributed
amongst the
creditors in the
following order of
priority:-
+ Secured creditor for an unrealised
amount for enforcing security interest

21. 180 days
45 days
(One time)
270 days
Adjudicating Authority after admission of application shall, by an order
Declare a
Moratorium
Cause a Public
Announcement
Appoint Interim
Resolution Professional
FAST TRACK :
90 days
90 days
(Maximum)
135 days
TIME BOUND