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Insolvency & Bankruptcy Code (IBC) 2016 🆕

Why IBC? Before 2016, insolvency laws were scattered, slow, and ineffective.

  • Took 4-5 years to resolve.
  • Recovery rate: Only 20-25% (Very low).
  • Debtors would delay and drag cases.

IBC 2016: One unified law for time-bound insolvency resolution.

Motto: "Resurrection over Death" - Try to save company first, liquidate only if necessary.

Key Principles ðŸŽŊ

  1. Time-Bound: Resolution must happen in 330 days (max).
  2. Creditor-in-Command: Creditors decide fate (not debtor).
  3. Professional Management: Insolvency Professionals handle process.
  4. Revival Focus: Aim to keep company alive with new management/investors.

Corporate Insolvency Resolution Process (CIRP) 🔄

The main process under IBC.

Trigger (How it Starts):

Financial Creditor (Banks/FIs), Operational Creditor (Suppliers), or Corporate Debtor itself can file application with NCLT.

Threshold: Default of â‚đ1 Crore or more.

Process (Step-by-Step):

Day 0: Application filed with NCLT.

Day 1-14: NCLT admits application (or rejects).

Day 1: Moratorium begins (Stay on all recovery actions).

  • Creditors cannot sue.
  • Assets cannot be sold.
  • Company gets breathing space.

Day 1-14: Interim Resolution Professional (IRP) appointed.

  • Takes control from directors.
  • Manages company as "going concern".

Day 30: Committee of Creditors (CoC) formed.

  • Financial creditors (75% voting power can decide).

Day 30-180: Resolution Plans invited.

  • Potential buyers/investors submit plans (acquisition, debt restructuring, etc.).

Day 180-270: CoC votes on best plan (75% majority needed).

Day 270-330: If plan approved, NCLT approves.

  • Company saved! New management takes over.

If NO plan approved: Liquidation ordered.

  • Company sold off (assets distributed to creditors).
Success Stories - IBC Revivals

IBC has saved many companies:

  • Bhushan Steel: Taken over by Tata Steel (â‚đ35,200 Cr deal).
  • Essar Steel: Acquired by ArcelorMittal (â‚đ42,000 Cr).
  • Binani Cement: Taken over by UltraTech.

Before IBC: These would have died or taken 10+ years. With IBC: Resolved in 1-2 years, companies revived, jobs saved!

Liquidation under IBC 💀

If CIRP fails (no viable plan), NCLT orders liquidation.

Liquidator appointed → Assets sold → Creditors paid → Company dissolved.

Waterfall (Priority):

  1. Insolvency Resolution Process costs
  2. Workmen's dues (24 months wages)
  3. Secured creditors
  4. Unsecured creditors
  5. Government dues
  6. Shareholders (Last, usually nothing)

IBC vs Old System 🆚

FeatureBefore IBC (Companies Act)After IBC 2016
Timeline4-5 years330 days (max)
Recovery Rate20-25%40-45% (improving)
FocusLiquidationRevival first, liquidation last
ControlCourt/Debtor could delayCreditor-driven, time-bound
ForumsMultiple laws, multiple forumsOne code, one forum (NCLT)

Key Institutions 🏛ïļ

  1. NCLT: National Company Law Tribunal (Adjudicating Authority).
  2. NCLAT: Appellate Tribunal (Appeal from NCLT).
  3. IBBI: Insolvency and Bankruptcy Board of India (Regulator).
  4. Insolvency Professionals (IP): Conduct the process.

Quiz Time! ðŸŽŊ

Test Your Knowledge

Question 1 of 5

1. IBC 2016 stands for:

Income and Business Code
Insolvency and Bankruptcy Code
Indian Banking Code
None

ðŸ’Ą Final Wisdom: "IBC changed the game. From 'Promoters Paradise' (delay forever) to 'Creditors Democracy' (time-bound resolution)!" ⏱ïļâš–ïļ

🎉🎉🎉 CONGRATULATIONS! 🎉🎉🎉

You have completed ALL 52 Lessons of Business Laws!

From Contract Act to IBC 2016. From Caveat Emptor to Corporate Governance. From Patents to Proxies.

You are now a Business Laws Expert! 🏆📚⚖ïļ

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