The Insolvency and Bankruptcy Board of India (IBBI) was founded in 2016 by the Insolvency and Bankruptcy Code (IBC). A healthy credit flow and the creation of fresh capital are crucial in a developing economy like India, and when a corporation or business becomes insolvent, it starts to default on its obligations. Now the creditors have to recover their money as soon as possible, thus the establishment of the Insolvency and Bankruptcy Board of India.
Insolvency and Bankruptcy Board of India
On October 1st, 2016, the Indian Insolvency and Bankruptcy Board was founded. It is in charge of carrying out the Insolvency and Bankruptcy Code (IBC). The IBC consolidates and changes the legislation for the timely settlement of individuals, partnerships, etc. The IBBI controls both processes and professionals. It also enforces rules for corporate insolvency resolution, individual insolvency resolution, corporate liquidation, and individual bankruptcy under the IBC, and it also has regulatory oversight over insolvency professional agencies, insolvency professional entities, insolvency professionals, and information utilities.
Insolvency and Bankruptcy Board of India Members
- The Chairperson.
- Three officers from the Central Government who are at least the level of a Joint Secretary and not lower. Each of the three members will serve as an ex-officio representative of the ministries of finance, corporate affairs, and law. A Reserve Bank of India employee (RBI).
- Three of the five members the Union Government has chosen are full-time members.
Power of Insolvency and Bankruptcy Board of India
The Board may draught model bylaws for the professional insolvency agencies to approve, which might include the following provisions:
- The basic requirements for members of professional insolvency agencies in terms of professional competency.
- The requirements for members of insolvency professional agencies’ ethical and professional behavior.
- Requirements for enrollment of individuals as members and the nondiscriminatory awarding of membership to insolvency professional organizations.
- Establishing a governing board for the management and internal governance of the professional insolvency agency in accordance with the rules laid forth by the Board.
- The specific categories of people to whom members will offer services at reduced prices or without payment.
- The causes and procedures for penalizing members of insolvency professional organizations.
- A fair and open process for resolving complaints against insolvency professional agency members.
- The criteria for excluding insolvency professionals from membership in insolvency professional agencies.
- The process for enrolling individuals as members, the amount of the membership fee, and the method of collecting the membership fee for individuals to join the professional insolvency agency.
- The procedure for administering the test to enroll insolvency professionals.
- The process for evaluating and keeping track of the member’s insolvency professional activities.
- The obligations and other tasks that members must carry out.
- The process used to undertake disciplinary actions, impose fines, and use money collected as fines against its members and insolvency professionals.
- While exercising its IBC powers, the Board may also wield the authority granted to a civil court under the Civil Procedure Code of 1908 (CPC).
Functions of Insolvency and Bankruptcy Board of India
- Identify the minimum eligibility requirements for registering insolvency professionals, professional insolvency agencies, and information utilities. Register, renew, suspend, withdraw, and revoke registration.
- Encourage the growth of insolvency professionals, insolvency professional organizations, information services, and other institutions, and regulate their activities.
- Levy costs or charges for carrying out the IBC’s objectives, such as renewal fees for insolvency professionals, information utilities, and professional insolvency agencies
- Describe the rules and requirements for how insolvency professional organizations, insolvency practitioners, and information utilities must operate.
- Set guidelines for the minimum test content required of insolvency professionals who wish to join insolvency professional organizations.
- Execute the necessary instructions for compliance with the terms of the IBC and the rules by conducting inspections, investigations, monitoring the effectiveness, auditing the operation, and insolvency professional agencies, insolvency professionals, and information utilities.
- Call the insolvency professional organizations, insolvency practitioners, and information utilities for any records and information.
- As required by the regulations, publish research papers, information, data, and other material.
- Describe the rules governing how information utilities must acquire, store, and provide access to data.
- Upkeep, gathering, and dissemination of data about bankruptcy and insolvency cases.
- Encourage the use of best practices and openness in board governance.
- Maintain webpages and other essential, widely accessible electronic information repositories.
- Together with other statutory authorities, enter into a memorandum of understanding.
- Provide the information utilities, insolvency professionals, and insolvency professional agencies with the relevant guidelines.
- Establish a process for resolving complaints against insolvency professionals, insolvency professional organizations, and information utilities, and issue orders about the complaints made against them for failing to comply with the IBCs and regulations’ requirements.
- Before announcing any rules, specify the channels for issuance, including the conduct of public consultation processes.
- Establish rules and regulations on topics related to bankruptcy and insolvency that are mandated by the IBC, such as the procedure for the time-bound disposition of the corporate debtor’s assets.
Procedure under IBC
- When a corporate debtor (CD), or a business that has borrowed money to operate, is unable to make loan payments, either the creditor or the debtor may submit an application for the start of a Corporate Insolvency Resolution Process (CIRP) under Section 6 of the IBC.
- A 1 crore rupee threshold is there, after which a creditor or debtor may file for insolvency.
- A designated adjudicating authority (AA) under the IBC must be contacted in order to file an application for insolvency; these AAs are the several NCLT benches located throughout India.
- The Tribunal must give a justification if the admission is delayed and has 14 days to accept or deny the application.
- As soon as an application is approved by the AA, the CIRP or resolution procedure gets started. The new required limit of 330 days has been set for finishing the settlement procedure.
- The AA names an interim resolution professional (IRP), who is registered with a professional insolvency agency, when the application is accepted (IPA). IRPs might be qualified like licensed solicitors, corporate secretaries, chartered accountants, and more.
- After being appointed by the Tribunal, the IRP assumes control over the defaulter’s assets and business operations, gathers data from Information Utilities (repositories that track the debtor’s credit history) about the company’s state, and then coordinates the formation of a Committee of Creditors, or CoC.
- The most crucial corporate decision-making body in every CIRP is a CoC, which consists of all (unrelated) financial creditors of a defaulting firm. A CoC determines whether the defaulting company is viable enough to be reformed and given a fresh start or liquidated. Additionally, it names an insolvency professional (IP), who may be the same person as the IRP or a different professional, to oversee the business’s activities throughout the CIRP.
- The IP solicits and reviews suggestions for resolution plans for businesses, which may involve debt restructuring, mergers, or demergers.
- It sends the CoC eligible plans, which the CoC can accept if it obtains 66% of the votes cast by committee members. The corporation pursues liquidation if the CoC rejects any settlement proposal.
- In the event that a plan is accepted, the CoC submits it to the Tribunal, which then accepts the plan, which the debtor is required to carry out. AAs have the option to reject a plan.
To protect the right of creditors Insolvency and Bankruptcy Board of India was established so that creditors could receive their share of the money. Insolvency and Bankruptcy Code, 2016, governs IBBI. To know more about the Insolvency and Bankruptcy Board of India, get Business Lawyer here.