Financial distress is an inevitable part of business cycles, but how it is managed determines survival. In India, the Insolvency and Bankruptcy Code (IBC), 2016 has become a landmark legislation to resolve insolvency and bankruptcy cases efficiently.

What is the Insolvency and Bankruptcy Code (IBC)?

IBC consolidates laws related to insolvency resolution of companies, partnerships, and individuals. It provides a time-bound framework to maximize asset value and balance the interests of creditors and debtors.

Key Features of IBC

• Time-Bound Resolution: Insolvency must be resolved within 180 days (extendable by 90).

• National Company Law Tribunal (NCLT): The adjudicating authority for corporate insolvency.

• Creditors in Control: Creditors, not debtors, drive the resolution process.

• Insolvency Professionals: Certified professionals manage the resolution process.

• Liquidation & Recovery: If resolution fails, liquidation follows under NCLT supervision.

Benefits for Businesses

• Predictability & Transparency: Clear rules ensure fair treatment.

• Investor Confidence: Boosts India’s ranking in ease of doing business.

• Debt Restructuring: Companies can reorganize debts and avoid liquidation.

• Faster Resolution: Unlike older systems, IBC prevents endless delays.

Challenges under IBC

• Capacity Issues: Overloaded NCLT benches cause delays.

• Haircuts for Banks: Creditors often face major debt write-offs.

• Implementation Gaps: Certain cases drag on due to litigation and appeals.

Conclusion

Despite challenges, IBC has transformed India’s insolvency regime. Businesses facing financial distress should seek timely legal advice to restructure effectively and avoid liquidation.