Your Total Savings ₹50000 What is the Insolvency and Bankruptcy Code?
The Insolvency and Bankruptcy Code (IBC) is a law enacted in 2016 in India. It provides a streamlined and uniform procedure for insolvency resolution among corporates, partnership firms, and individuals. Its primary aim is to facilitate a time-bound process for insolvency resolution. It ensures that the interests of stakeholders are balanced while maximizing the value of assets.
What is the difference between Bankruptcy and Insolvency?
Insolvency is a financial condition where an entity is unable to pay off its debts as they come due. Bankruptcy is a legal process that occurs when an insolvent entity formally declares its inability to pay its debts. This leads to court-administered resolution or liquidation to address the debt issues.
Why is IBC called a Code, not an Act?
IBC is referred to as a "Code" because it comprehensively consolidates and harmonizes various existing laws related to insolvency and bankruptcy into a single cohesive framework. This integration provides a uniform legal structure applicable across different entities and circumstances, unlike an Act which typically focuses on specific areas.
What are the benefits of the Insolvency and Bankruptcy Code?
The IBC brings several benefits. This includes speeding up the insolvency resolution process, enhancing discipline among debtors, improving recovery rates for creditors, and fostering greater confidence among investors. These measures collectively contribute to a healthier economic environment and increased stability in the financial system.
What is the penalty for breaching the Insolvency and Bankruptcy Code?
Penalties under the IBC can include fines and imprisonment for various offenses. This includes hiding property, providing false information, or misconduct by professionals involved in the insolvency process. The specifics of the penalty depend on the nature and severity of the violation committed.
What is the objective of the Insolvency and Bankruptcy Code?
The IBC aims to consolidate and amend existing laws related to insolvency, establish a time-bound resolution process, maximize the value of assets, and balance the interests of all stakeholders. Its broader objective is to promote the ease of doing business and ensure that the insolvency process is efficient and equitable.