IndiaFilings Review of The Insolvency and Bankruptcy Code

The recently passed Insolvency and Bankruptcy Code, 2015 has overhauled the insolvency proceedings in India and creates a time-bound process for insolvency resolution for companies and individuals. In this article, we review the Insolvency and Bankruptcy Code, 2015 in detail.

Insolvency Professional Agency (IPA)

The Insolvency and Bankruptcy Code, 2015 has proposed the creation of insolvency professional agencies (IPAs). The primary function of the insolvency professional agencies will be to regulate

insolvency professionals by conducting examinations to enrol them, and enforcing a code of conduct. Further, the insolvency professionals will be responsible for carrying out the resolution process and managing the company during insolvency resolution. Only persons registered as a member of an insolvency professional agency and Board can provide services relating to insolvency resolution. Further, the insolvency professional agency are required to make bye-laws to the minimum standards of professional competence for its members, the standards for professional and ethical conduct of its members and requirements for enrolment of persons as its members.

Information Utilities

The Insolvency and Bankruptcy Code, 2015 has proposed the creation of information utilities. Information Utilities would be used to collect, collate, authenticate and disseminate financial information to facilitate insolvency, liquidation and bankruptcy proceedings. Information utilities will be setup under a commercial model with any entity intending to submit financial information paying a fee after completion of registration. Entities accessing the information would be required to pay a fee for each time information is requested.

Bankruptcy Fund

The Insolvency and Bankruptcy Code, 2015 has proposed for the creation of a Insolvency and Bankruptcy Fund for the purposes of insolvency resolution, liquidation and bankruptcy of persons under the Code. Funds from the following are to be credited to this account:

Grants made by the Central Government for the purposes of the Fund;
Amount deposited by persons as contribution to the Fund;
Amount received in the Fund from any other source; and
Interest or other income received out of the investment made from the Fund.

Adjudicating Authorities

The Insolvency and Bankruptcy Code, 2015 has recommended designating the National Company Law Tribunal (NCLT) and Debt Recovery Tribunal (DRT) as the Adjudicating Authorities for corporate persons and firms and individuals, respectively, for resolution of insolvency, liquidation and bankruptcy. In case any person is aggrieved by the order of the Adjudicating Authority, they can appeal to the National Company Law Appellate Tribunal (NCLAT).

Download Insolvency and Bankruptcy Code, 2015

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Frequently Asked Questions

Common questions about Insolvency and Bankruptcy Code Review.

The primary function of the Insolvency Professional Agencies (IPAs) is to regulate insolvency professionals by conducting examinations to enroll them and enforcing a code of conduct. The IPAs will ensure that insolvency professionals meet the minimum standards of professional competence and ethical conduct required for carrying out the insolvency resolution process and managing companies during insolvency.

Information Utilities are entities proposed under the Insolvency and Bankruptcy Code, 2015 to collect, collate, authenticate, and disseminate financial information to facilitate insolvency, liquidation, and bankruptcy proceedings. They will operate on a commercial model, where entities submitting financial information and accessing information will be required to pay fees.

The Insolvency and Bankruptcy Fund proposed under the Code is intended to fund the insolvency resolution, liquidation, and bankruptcy processes of persons under the Code. The Fund will be credited with grants from the Central Government, contributions from persons, amounts received from other sources, and income from investments made from the Fund.

The National Company Law Tribunal (NCLT) has been designated as the Adjudicating Authority for corporate persons and firms, while the Debt Recovery Tribunal (DRT) has been designated as the Adjudicating Authority for individuals, for resolution of insolvency, liquidation, and bankruptcy under the Code.

If any person is aggrieved by the order of the Adjudicating Authority (NCLT or DRT), they can appeal to the National Company Law Appellate Tribunal (NCLAT) under the Insolvency and Bankruptcy Code, 2015.

The Insolvency Professionals, registered with the Insolvency Professional Agencies (IPAs), will be responsible for carrying out the insolvency resolution process and managing the companies during insolvency resolution under the Code. Only registered Insolvency Professionals can provide services related to insolvency resolution.

The Insolvency Professional Agencies (IPAs) are required to make bye-laws to set minimum standards of professional competence, standards for professional and ethical conduct, and requirements for enrollment of persons as members of the IPA. This will help the IPAs regulate the conduct of Insolvency Professionals.

The Insolvency and Bankruptcy Fund will be credited with grants from the Central Government, amounts deposited by persons as contributions to the Fund, amounts received from any other source, and interest or income received from investments made from the Fund.

No, only persons registered as members of an Insolvency Professional Agency (IPA) and the Insolvency and Bankruptcy Board can provide services related to insolvency resolution under the Code. Unregistered entities or individuals cannot provide such services.

The Insolvency and Bankruptcy Code, 2015 aims to create a time-bound process for insolvency resolution of companies and individuals. This is intended to ensure a speedy resolution of insolvency cases, preventing delays and ensuring timely recovery or restructuring for creditors and debtors.