What is IBC (Insolvency and Bankruptcy Code), 2016

The Insolvency and Bankruptcy Code, 2016 in India is the legislation for solving insolvencies of individuals and corporates. The idea behind having a bankruptcy law is to protect the different stakeholders who get affected by the failure of a business or the failure to repay debt.

It came into force in August, 2016 and replaced the old bankruptcy law in India which was a cumbersome, tedious and never-ending process.

Three major provisions which made the difference are

1. Time bound process, to be completed within 330 days

2. Debtor-in-possession replaced with Creditor-in-control, formation of Committee of Creditors

3. Creditors divided into- Financial creditors and Operational creditors

A Pre-Packaged Insolvency Resolution Process (PPIRP) has also been promulgated to for micro, small and medium enterprises (MSMEs).