your password has been reset successfully, Please login again.

Insolvency and Bankruptcy Code, 2016 – Boon or Bane for Investments

Impact of Insolvency and Bankruptcy Code, 2016 on Businesses and Investments that entrepreneur must be aware of.
BY Akshay Arora
Feature Writer, BusinessEx
Jun 27,2017

Insolvency and Bankruptcy Code,2016 is an 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 including alteration in the order of priority of payment of Government dues and to establish an Insolvency and Bankruptcy Board of India, and for matters connected therewith or incidental thereto.

Insolvency and bankruptcy code, 2016 seeks to achieve certainty and enforcement proceedings which will specifically help creditors and investors interests. Boon in investment will be seen especially from international investors primarily by virtue of this code which leads to a reduction in investment risk and protects the interest of investor in India.

It would be beneficial for businesses to generate capital funds through investments but they have to be fully aware of the fact to return dues on time in order to safeguard their firm from insolvency and bankruptcy.

Key changes introduced by this code that businessman and investors must know about are:-

  • Establishment of Insolvency and Bankruptcy Board of India (IBBI) to regulate IP and IU and promote transparency in government.
  • Regulation of insolvency professionals (IP) and insolvency professional agencies to develop professional standards, code of ethics and exercise a disciplinary role.
  • Insolvency information utilities (IU) will be set up that are specialised licensed bodies which will collect, collate, authenticate and disseminate information relating to indebtedness of the company. An individual database is also proposed to be set up to provide insolvency status of individual firms.
  • Insolvency adjudicating authority will exercise jurisdiction over the case by or against the debtor. The Debt Recovery Tribunal will be adjudicating authority with jurisdiction over individuals and partnership firms other than limited liability partnerships and appeals from DRT will lie to the Debt Recovery Appellate Tribunal (DRAT). For companies other than limited liabilities adjudicating authority will be National Company Law Tribunal (NCLT) and appeals from NCLT will lie to the National Company Law Appellate Tribunal (NCLAT).
  • Strict timelines for resolution of insolvency and liquidation proceedings will take place under this code.
  • The code provides for an automatic moratorium of 180 days and sometimes in exceptional cases a further period of 90 days is granted against any debt recovery actions by the creditors.
  • If the company is claimed insolvent then liquidation of assets takes place in which all the assets of the company will be distributed to creditors. Distribution is done on the basis of the priorities set under this code.
  • In a case of enforcing the code on assets situated outside India, a letter of request must be issued by adjudicating authority to a competent court of the foreign country where an asset is situated then the only asset can be dissolved.
Please add your Comment
SIMILAR Articles
February 20, 2018
If you want to be a successful entrepreneur then find your way to success after reading the points b ...More
By Akshay Arora
February 20, 2018
Selling business is a big step so make sure that you must prepare and make up your mind before going ...More
By Akshay Arora
February 19, 2018
An entrepreneur always finds it hard to get an investor on board in the initial stage so there are a ...More
By Akshay Arora
February 19, 2018
There are a lot of businesses on a boom now but these are the unique ones which are worth investing. ...More
By Akshay Arora
February 19, 2018
Running a business is a dream of many a people so make sure that you do it the right way by giving i ...More
By Akshay Arora
February 09, 2018
Small businesses are building up their own brand name with the help of social media. Let's see how s ...More
By Akshay Arora
February 06, 2018
Buying an established business means that you are one step ahead than the entrepreneurs who just sta ...More
By Akshay Arora
February 05, 2018
An entrepreneur seeks the support of a mentor in the time of need so it is better that you find the ...More
By Akshay Arora
February 01, 2018
Union Budget 2018 has revealed some policies that impact MSMEs, startups and investors which are hig ...More
By Akshay Arora
January 31, 2018
Let's see what experts have to say on this year budget expectations for startups and small businesse ...More
By Akshay Arora
January 30, 2018
Entrepreneur makes mistakes after raising funding which eventually affects startup performance. Here ...More
By Akshay Arora
January 29, 2018
Starting a business is not a child's play so it is essential that when entrepreneur exits from it he ...More
By Akshay Arora