IntroductionInsolvency and bankruptcy are closely related financial concepts, yet they represent distinct aspects of financial distress. Insolvency refers to a financial condition where an individual or entity is unable to meet debt obligations as they fall due. Bankruptcy, on the other hand, is a legal process that is initiated when such financial incapacity becomes unmanageable…
The Insolvency and Bankruptcy Code (IBC), 2016 establishes a consolidated legal framework for the resolution of insolvency and bankruptcy in India. Enacted with the objective of ensuring a time-bound and structured resolution process, the Code applies to various categories of debtors, while expressly excluding certain regulated entities. Applicability of the IBC The Code is applicable…
The Insolvency and Bankruptcy Code (IBC), 2016 provides a comprehensive and time-bound framework for the resolution of stressed assets in India. It marks a paradigm shift from the traditional debtor-in-possession model to a creditor-in-control approach, with the objective of maximizing asset value and fostering stronger credit discipline. The National Company Law Tribunal (NCLT) is designated…
The restructuring of assets, particularly through the sale of financial assets, constitutes a strategic initiative aimed at enhancing an entity’s financial stability and operational efficiency. This process typically involves the divestment of specific financial instruments—such as loans or receivables—to improve liquidity, reduce leverage, and reallocate capital toward core business activities or growth initiatives. Asset sales…
A bankruptcy remote entity is a special-purpose vehicle (“SPV”) that is formed to hold a defined group of assets and to protect them from being administered as property of a bankruptcy estate. The corporate documents of bankruptcy remote like memorandum association and article association may also attempt to create disablements to a bankruptcy filing. For…
The Insolvency and Bankruptcy Board of India (IBBI) notified the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) (Fourth Amendment) Regulations, 2020 on August 7, 2020. As per the latest amendment, which is effective from 07th August 2020, the authorized representative of creditors shall seek voting instructions only after the circulation…
Following the ordinance empowering RBI to lay down the process of initiating steps under the Insolvency and Bankruptcy Code (IBC), an Internal Advisory Committee (IAC) is set up by RBI to oversee the specific steps that are initiated by bankers for resolution of a bad debt. In its first meeting on June 12, 2017, the…
The Reserve Bank of India (RBI) issued comprehensive guidelines to enable the restructuring of advances by banks in response to the financial distress caused by the COVID-19 pandemic. These guidelines allow for a one-time modification of loan terms for eligible borrowers without necessitating a downgrade in asset classification, provided that specific regulatory conditions are met.…
On Friday (15th November 2019), the Ministry of Corporate affairs notified “Application to Adjudicating Authority for Insolvency Resolution Process for Personal Guarantors to Corporate Debtors) Rules, 2019”. [WAS PUBLISHED IN THE GAZETTE OF INDIA, PART II, SECTION 3, SUBSECTION (i)]. The new rule called in short as “Insolvency and Bankruptcy rule 2019” shall come into…
Stressed assets, primarily comprising non-performing loans (NPLs), represent a significant challenge for banks and financial institutions. Effective resolution of such assets is crucial to preserving financial stability, optimizing asset quality, and ensuring capital adequacy. To this end, banks employ a range of recovery strategies, including debt restructuring, asset reconstruction, legal proceedings, and one-time settlements, among…