Insolvency & Bankruptcy Code (IBC) Advisory

What is IBC advisory?

The Insolvency and Bankruptcy Code, 2016 (IBC) is India's law for resolving insolvency in a time-bound way. When a company defaults on debts above the threshold, creditors — or the company itself — can apply to the NCLT to start a corporate insolvency resolution process (CIRP). Control passes to a resolution professional, and creditors decide whether to accept a resolution plan or send the company into liquidation.

IBC advisory helps creditors use the Code to recover dues, helps companies and promoters understand their position and options, and supports claims and participation in the process.

The key terms

How the process works:

Default threshold

A CIRP can be started for a default of ₹1 crore or more.

Financial creditor

A lender, such as a bank or a party that lent money, applying under Section 7.

Operational creditor

A supplier or service provider, applying under Section 9 after a demand notice.

Moratorium

On admission, a stay on suits, recovery actions and asset transfers against the company.

Resolution professional

An insolvency professional who runs the company during the CIRP.

Committee of creditors

Financial creditors who vote on the resolution plan.

Pre-pack for MSMEs

A faster, debtor-initiated process for MSMEs, with lower default thresholds, where the promoter can propose a plan.

Why it matters

The IBC changes the balance between debtors and creditors:

Recovery lever

The threat of losing control often prompts debtors to settle.

Time-bound

CIRP must be completed within set time limits, with an outer limit of 330 days.

Promoter risk

Promoters can lose control, and some can't bid under Section 29A.

Personal guarantees

Personal guarantors to companies can face their own insolvency process.

Claims deadlines

Creditors who don't file claims on time may lose out.

Director duties

Directors can face liability for wrongful trading near insolvency.

Priority rules

Recovery depends on where a creditor sits in the waterfall.

Who is this for?

IBC proceedings involve legal representation before the NCLT; we work with insolvency professionals and advocates.

Who can start a CIRP?

Three routes into insolvency:

What we'll need from you

Debt evidence

Contracts, invoices, ledgers and acknowledgements.

Default evidence

Proof of default and date.

Correspondence

Demands, replies and any dispute raised.

Company details

Master data and financials of the debtor.

Security documents

Charges and guarantees, for secured creditors.

Board approvals

For companies filing their own application.

Fees depend on the stage and complexity; legal and NCLT fees are extra.

How the CIRP works

The main stages:

1. 1

   Application

   A creditor or the company applies to the NCLT.

2. 2

   Admission

   The NCLT admits the application, declares a moratorium and appoints an interim resolution professional.

3. 3

   Claims

   Creditors file claims, and a committee of creditors is formed.

4. 4

   Resolution plans

   Eligible bidders submit plans, which the committee evaluates.

5. 5

   Approval

   A plan approved by 66% of the committee goes to the NCLT for approval.

6. 6

   Liquidation

   If no plan is approved in time, the company goes into liquidation.

After the process

What follows:

Plan implementation

The successful resolution applicant takes over and pays creditors as per the plan.

Clean slate

Claims not in the plan are generally extinguished.

Liquidation

Assets are sold and proceeds distributed in the statutory order.

Avoidance actions

Preferential, undervalued or fraudulent transactions can be reversed.

Guarantor actions

Creditors can pursue personal guarantors separately.

Tax

Debt write-offs and plan payments have tax consequences.

Benefits and responsibilities