Insolvency and Bankruptcy Code, 2016: The Insolvency Resolution Process for Companies and Limited Liability Entities

The Insolvency and Bankruptcy Code, 2016 (IBC) provides for a time-bound and efficient framework for resolving insolvency and bankruptcy cases of companies and limited liability partnerships. The Code was enacted with the objective of protecting the interests of creditors and debtors, and promoting entrepreneurship and economic growth.

The insolvency resolution process for companies and limited liability partnerships under the IBC is called the Corporate Insolvency Resolution Process (CIRP). The CIRP is a 180-day process, which can be extended by the Adjudicating Authority (AA) for a further period of 90 days.

The CIRP is initiated by the creditors of the corporate debtor. The creditors can initiate the CIRP by filing an application with the National Company Law Tribunal (NCLT). The NCLT will then appoint an insolvency professional to act as the resolution professional.

The resolution professional will then take steps to assess the financial situation of the corporate debtor and to develop a resolution plan. The resolution plan must be approved by the majority of the creditors of the corporate debtor.

If the resolution plan is approved, the corporate debtor will be rehabilitated. If the resolution plan is not approved, the corporate debtor will be liquidated.

Here are some MCQs on the Insolvency and Bankruptcy Code, 2016:

  1. What is the objective of the Insolvency and Bankruptcy Code, 2016?
    • To provide a time-bound and efficient framework for resolving insolvency and bankruptcy cases of companies and limited liability partnerships.
    • To protect the interests of creditors and debtors.
    • To promote entrepreneurship and economic growth.
    • All of the above
    • The answer is All of the above. The Insolvency and Bankruptcy Code, 2016 is a comprehensive law that aims to provide a time-bound and efficient framework for resolving insolvency and bankruptcy cases of companies and limited liability partnerships, protect the interests of creditors and debtors, and promote entrepreneurship and economic growth.
  2. What is the insolvency resolution process for companies and limited liability partnerships called under the IBC?
    • Corporate Insolvency Resolution Process (CIRP)
    • Personal Insolvency Resolution Process (PIR)
    • Liquidation process
    • None of the above
    • The answer is Corporate Insolvency Resolution Process (CIRP). The insolvency resolution process for companies and limited liability partnerships under the IBC is called the Corporate Insolvency Resolution Process (CIRP).
  3. Who can initiate the CIRP?
    • The creditors of the corporate debtor
    • The corporate debtor
    • The Government
    • The National Company Law Tribunal (NCLT)
    • The answer is The creditors of the corporate debtor. The CIRP is a creditors’ driven process. The creditors of the corporate debtor can initiate the CIRP by filing an application with the NCLT.

Here are some additional details about the CIRP:

  • The resolution professional must be a qualified insolvency professional appointed by the NCLT.
  • The resolution professional must act in the best interests of all stakeholders.
  • The resolution plan must be fair and equitable to all stakeholders.
  • The resolution plan must be implemented within 180 days of the commencement of the CIRP.

The CIRP is a complex process, and there are many different factors that can affect its outcome. However, the IBC provides a framework for resolving insolvency and bankruptcy cases of companies and limited liability partnerships in a time-bound and efficient manner.