ICAI’s 250 nos. Frequently Asked questions (FAQs) on “the Insolvency and Bankruptcy Code 2016 and it’s Regulations”
To facilitate better understanding of the provisions of the Insolvency and Bankruptcy Code, 2016 and its Regulations (released upto 31st January, 2017), the ICAI has published a set of 250 Nos. Frequently Asked Questions (FAQs), for help and guidance of the stakeholders/ members, as under:
The Insolvency and Bankruptcy Code, 2016 is one of the major economic reform Code initiated by the Government in the year 2015. There were multiple overlapping laws and adjudicating forums dealing with financial failure and insolvency of companies and individuals in India.
Also, the existing laws were not aligned with the market realities and had several problems and were inadequate. As per that legal framework, provisions relating to insolvency and bankruptcy for companies could be found in the Sick Industrial Companies (Special Provisions) Act, 1985, the Recovery of Debt Due to Banks and Financial Institutions Act, 1993, the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 and the Companies Act, 2013. Resolution and jurisdiction being with the multiple agencies with overlapping powers were leading to delays and complexities in the process.
Accordingly, the Insolvency and Bankruptcy Code, 2015 was introduced in Lok Sabha in December, 2015 and referred to the Joint Parliamentary Committee. After due consultation process, the Joint Committee submitted its Report to the Hon’ble Parliament which was subsequently passed by both the Houses of Parliament in May 2016 as the Insolvency and Bankruptcy Code, 2016 which got assent of the President of India on 28th May, 2016.
The Code offers a uniform, comprehensive insolvency legislation encompassing all companies, partnerships and individuals (other than financial firms). There is a clear and explicit process to be followed by all stakeholders. Also, there is shift of control from shareholders and promoters to creditors. The IBC provides an institutional set-up comprising of five pillars, i.e., Insolvency Professionals Agency, Insolvency Professionals, Information Utilities, Insolvency and Bankruptcy Board of India and Adjudicating Authority.
The Implementation of any system does not only depend on the law, but also on the institutions involved in administration and execution of the same. It depends on the effective functioning of all the institutions but the Insolvency Professionals have a vital role to play in the insolvency and bankruptcy resolution process. The pace with which this Code is being implemented will also help India in improving its ‘Ease of Doing Business’ rankings and enhancing India’s ranking as resolving insolvency is a key criteria in the World Bank’s survey.
At this backdrop, to facilitate the understanding of the provisions of the Insolvency and Bankruptcy Code, 2016 and its Regulations, the Corporate Laws & Corporate Governance Committee decided to bring out a publication on the Frequently Asked Questions on the Insolvency and Bankruptcy Code, 2016.
The publication has been designed in a question and answer format to assist our members and other stakeholders to enable them to have clarity on the provisions of the Insolvency and Bankruptcy Code, 2016 and its Regulation released upto 31st January, 2017.