All you need to know about the Insolvency and Bankruptcy Code, 2016 By Athulya - April 10, 2019 Last Updated at: May 19, 2020 5254 All you need to know about the Insolvency and Bankruptcy Code, 2016 Sitharaman recently said that if the disruption caused by coronavirus extends then it would suspend the use of the corporate insolvency resolution process for sometime. The finance minister had also increased the minimum amount of the default required to initiate the insolvency resolution and liquidation processes against companies from Rs 1 lakh to Rs 1 crore The arrival of the Insolvency and the Bankruptcy code is better understood in the situation of the jump up of the insolvency resolutions in the country. The difference is seen when related with other developed and developing countries. According to the World Bank data, India took 4.3 years on an average to resolve the insolvency. Register Your MSME for FREE As always if you’d like to know more about professional help on startups, registrations or compliance, browse our services and find our how we do it differently from others. Register a Company PF Registration MSME Registration Income Tax Return FSSAI registration Trademark Registration ESI Registration ISO certification Patent Filing in india The coming of the Insolvency and the Bankruptcy code is best understood in the context of the rising insolvency resolutions in the country, related to other developing and developed economies in the world. As per data by the World Bank (2015), India on an average took 4.3 years to resolve insolvency wherein other economies have also exhibited an average of 1 year as well. It is a reflection of the legal lacunas that are resulting in a delay of the cases relating to insolvency and bankruptcy. This recent code of 2016 is applied to both corporate personalities (companies, partnerships, LLPs, etc) as well as the individual. Some of the key features of the Code, as now applicable in India are listed as follows: Insolvency Board: The Code has also introduced a new regulator of these matters- the Insolvency and the Bankruptcy Board of India. It is mandated to oversee the functioning of the insolvency intermediaries and regulate the process of insolvency. Time-Bound Process: The 2016 Code of Insolvency and Bankruptcy has squarely addressed the delay in addressing such cases. It has provided a that the resolution of insolvency and bankruptcy cases must be a time-bound process, it must be completed in 180 days. This also helps to avoid malafide continued control of the creditor over the debtor’s asset on default in repayment. The Code also consolidates provisions of the current legislative framework to form a common forum for debtors and creditors of all classes to resolve insolvency. Adjudicatory Authorities: The Code has also provided for the National Company Law Tribunal (NCLT) to be the adjudicatory authority in the matters of corporate insolvency. The hierarchy of such authority goes up, first to the National Company Law Appellate Tribunal (NCLAT) and then the Supreme Court of India. As far as the individual insolvency matters are concerned, the rightful jurisdiction is with the Debt Recovery Tribunal (DRT), then goes to the Debt Recovery Appellate Tribunal (DRAT) & then to the Supreme Court of India. The rationale behind having specialised tribunals and appellate bodies for these matters is based on a broader philosophy that insolvency resolutions should not be court driven rather be commercially and professionally driven. Moreover, the tribunals (NCLT and DRT) and the appellate authorities (NCLAT and DRAT) have a role limited to ensuring due process, they are not mandated to adjudicate on the merits of any insolvency resolution. The process of Insolvency Resolution: The Code provides for separate resolution processes for corporate debtors or entities and individual debtors. For corporate debtors, the resolution process is two staged- the Insolvency Resolution Process (IRP) and the Liquidation. The IRP envisages the following steps- commencement, moratorium, the appointment of resolution professionals, creditors committee and revival plan. As far as individual debtors and unlimited partnerships are concerned, the Code applies only where the minimum default amount is INR 1000 and above. Automatic Fresh Start: The eligible debtors (based on the gross income) can apply to the DRT with the request to discharge from certain debts up to a certain threshold, in order to start afresh. Insolvency Resolution Process [IRP]: The IRP consists of formulating a plan of repayment by the debtor and to be approved by the creditors. It is only when the creditors approve, the DRT then passes a binding order for both the parties, onto the terms of the repayment plan. If the plan is not approved by the creditor, both the creditor as well as debtor must apply for a bankruptcy order. Other Institutional Infrastructure: Apart from the Insolvency and Bankruptcy Board and the relevant Adjudicatory Authorities, there are also other institutional players that have been put in place and mandated with certain functioning by the overall scheme of the Code. The other components of the institutional infrastructure are as follows: Insolvency Resolution Professionals: The Insolvency Resolution Professionals are mandated with the task of verifying the claims of the creditors, forming a creditors committee, handling the business of the debtor during the moratorium process and helps in making a revival plan. These professionals are seen as intermediaries between the two parties in the bankruptcy process. Information Utilities: The Information Utilities are involved in dealing with information- collection, collation, authentication and dissemination of financial information of debtors. The information sorting process carried out by the Information Utilities is carried out by centralised electronic databases. It is the creditors, as mandated by way of the Code, who provide financial information of debtors. It is an open-access database, all creditors, professionals, liquidators and any other stakeholder can access it and speed up the insolvency resolution process. Some of the basic features of the code that are applicable in India are:Insolvency Board, Time-Bound process, the process of Insolvency Resolution. The code introduced a new regulator for all these matter- the Insolvency and the Bankruptry Board of India. The code provides National Company Law Tribunal(NCLT) to corporate insolvency. Can the taxpayer add invoices if the supplier did not upload the invoice? It is easily possible to add invoices. If you have obtained good or services or managing invoices, you can upload invoice.Understand the procedure for GST registration and GST returns here. I ALREADY HAVE ONE MSME REGISTRATION CERTIFICATE, CAN I APPLY FOR ANOTHER ONE? 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