Insolvency and Bankruptcy Code
Why in news ?
The Supreme Court refused to give reprieve to personal guarantors in case of default by a company under the Insolvency and Bankruptcy Code (IBC).
Introduction: The IBC was introduced by the Central Government in 2016.
Objective:
- To streamline and expedite the process of resolving insolvency, which was historically a lengthy and economically challenging procedure.
- The IBC covers a wide range of insolvency-related matters and is designed to protect the interests of small investors.
- Resolution Timeframe: IBC establishes a time-bound process for resolving insolvency cases. Companies are required to complete the entire insolvency exercise within 180 days.
- For smaller companies, including startups with an annual turnover of Rs 1 crore, the deadline is set at 90 days, with a possible extension of 45 days.
Insolvency and Bankruptcy Code, 2016
- Insolvency and Bankruptcy Code, 2016 provides a time-bound process for resolving insolvency in companies and among individuals.
- Insolvency is a situation where individuals or companies are unable to repay their outstanding debt.
- Bankruptcy, on the other hand, is a situation whereby a court of competent jurisdiction has declared a person or other entity insolvent, having passed appropriate orders to resolve it and protect the rights of the creditors. It is a legal declaration of one’s inability to pay off debts.
- The Government implemented the Insolvency and Bankruptcy Code (IBC) to consolidate all laws related to insolvency and bankruptcy and to tackle Non-Performing Assets (NPA), a problem that has been pulling the Indian economy down for years.
Source – The Hindu
