What is The Insolvency and Bankruptcy Board of India:-
The IBBI, insolvency and bankruptcy board of india falls under Insolvency and Bankruptcy Code 2016, it is a regulator which regulates the profession as well as processes related to insolvency and bankruptcy.
It regulates bad loan cases reported by various creditors, which are especially involved with banks in India. It works towards resolving any insolvency for corporates, individuals and partnership firms.
- It was established on 1 October 2016 in New Delhi.
- Parliament of India is the founder of Insolvency and Bankruptcy Board of India.
- Dr. M. S. Sahoo is the Chairperson of the Insolvency and Bankruptcy Board of India.
To know what this department does, first let’s understand what Insolvency is –
What is Insolvency ?
Insolvency is a state of financial distress which describes a situation arises due to the inability to pay off the outstanding debts on time to the creditors because the assets are not enough to cover up the liabilities.
In the case of companies insolvency caused due to the continuous fall in sales, and it doesn’t have enough cash to meet out it’s day to day expenses of the business for which it takes loans from the creditors and banks.
Insolvency can arise from poor cash management, a reduction in cash flow, or an increase in expenses.
IBBI deals with some of these proceedings:
- Corporate Insolvency
- Corporate Liquidation
- Individual Bankruptcy
Functions of Insolvency and Bankruptcy Board of India –
Here we are going to discuss some functions of Insolvency and Bankruptcy Board of India:-
- Corporate Insolvency resolution process (CIRP):- The insolvency resolution process is a one under the Insolvency and Bankruptcy Code, 2016, where the National Company Law Tribunal (NCLT) initiates a corporate insolvency resolution process (CIRP).
When a company defaults on making payment to creditors then creditors can file an application in front of NCLT if creditors loss is minimum 1 lac, because the minimum amount of default for initiation of CIRP is Rs.1,00,000.
After that NCLT will initiate an IRP interim resolution professional, whose name will be given by the creditor, which can be anyone from the creditor side.
Under IRP, the Insolvency resolution process appointed professional will be having the power to take charge of the company which has defaulted.
That professional’s main work is taking necessary steps to revive the company.
Appointed professionals would have the power to raise fresh funds to continue operations.
- Corporate Liquidation:- Liquidation is a process through a company which is going to be shut down and its existence comes to an end, because it is unable to pay its creditors and need to sell off its assets to pay them.
Liquidation process can be initiated under the insolvency and bankruptcy code 2016:- If the IRP interim resolution professional fails to find a resolution on or before the expiry date of insolvency resolution period.Then the company becomes liquidated to pay the creditors by selling off its assets .
In starting of this process first a public announcement shall be made about the corporate debtor being liquidated.And then further process can be done.
- Individual Bankruptcy:- As per the IBC Insolvency and Bankruptcy Code, 2016, a creditor can file petition for individual bankruptcy for an amount exceeding as little as Rs 1000 as per the notification by the Central Government. It can be revised upto Rs.1,00,000.
The IBC does contain a chapter relating to insolvency and bankruptcy process for individuals and partnership firms, but the rules for individual bankruptcy are yet to be notified.
Insolvency and Bankruptcy Board of India recently started to promote the development and working and practices of insolvency professionals,insolvency professional agencies and information utilities so now we will talk about these points:-
- Insolvency Professionals:- An Insolvency Professional is one who is registered with the Insolvency and Bankruptcy Board of India (IBBI). They work for the dissolution process of an insolvent individual, companies, or partnerships.
These professionals get authorization from the IBBI to do work on behalf of such insolvent individuals and companies.
In the situation of bankruptcy, the insolvency professionals play a big role in liquidating the entity assets and other settlement processes.
- Insolvency Professional Agencies:- Any registered agency with IBBI becomes insolvency professional agencies, the most important work of these agencies are to regulate the activities of insolvency professionals and ensure their development in the industry.
These professional members of the agency are required to work as per the terms and conditions of the insolvency agency code.
These agencies have the primary function of granting membership to insolvency professionals.
These agencies also enquire about the member’s grievances and take steps to resolve those.
- Information Utilities:- An Information Utility becomes a professional organization after getting registered with IBBI under Section 210 of IBC, 2016.
It works for providing authenticated information about debts and defaults.
Information Utility plays a big role in storing the financial information of the users.
And it helps the lenders in taking the informed decision about the credit transaction.
It would also make debtors attentive as the financial information is available with the utilities.
It plays a vital role in the creation of evidence; the information can also be used as evidence in bankruptcy cases.
How do you declare Insolvency in India ?
Before going through this point we should have knowledge about the difference between insolvency and bankruptcy, there is a minor difference between insolvency and bankruptcy.
Insolvency is the state of being unable to pay the money owed, by a person or company on time and bankruptcy is a process of declaring insolvency in india.
When a person becomes insolvent and he wants to become debt free so he files an application to the relevant court where he declares himself as insolvent due to his inability to pay his debts and expenses, seeking to be declared as a bankrupt.
When court decides the appropriation of the personal property of the insolvent among his various creditors. It is the last stage of insolvency and gives a new lease to the insolvent to start a new fresh.
It relieves the individuals or a company from all the debts and other disadvantages of insolvency.
By following this process people can declare their insolvency in india.
Structure of IBBI
IBBI has a total of 10 members committee which includes one chairperson, representatives from the Ministries of Finance, Law and corporate affairs, and the Reserve Bank of India.
- Dr. M. S. Sahoo, Chairperson, Insolvency and Bankruptcy Board of India
- The Insolvency and Bankruptcy Board of India has appointed three people as whole time members:
- Sh. Sudhakar Shukla
- Navrang Saini
- Mrs. Mukulita Vijayawargiya
- The Insolvency and Bankruptcy Board of India has appointed 4 people as Ex-officio Members:
- Dr. Shashank Saksena, Adviser (Capital Markets), Department of Economic Affairs, Ministry of Finance
- Sh. Gyaneshwar Kumar Singh, Joint Secretary, Ministry of Corporate Affairs
- Dr. Rajiv Mani, Joint Secretary and Legal Adviser, Department of Legal Affairs, Ministry of Law & Justice
- Sh. Unnikrishnan A, Legal Adviser, Reserve Bank of India
- The Insolvency and Bankruptcy Board of India has appointed 2 people as part time Members:
- Dr. Krishnamurthy Subramanian, Chief Economic Advisor
- Sh. B. Sriram, Former Managing Director & CEO of IDBI Bank Ltd.
So here I have given all the information about the IBBI insolvency and bankruptcy board of India and IBC Insolvency and Bankruptcy Code, 2016.
Which was established to support the falling companies to stand again on their feet by restructuring their credits so that they can repay them easily and make a fresh start.
I hope all this information will surely work for you and give you knowledge in an easy way which you will be able to understand very easily.