Definition
Insolvency and Bankruptcy Code (IBC)
The Insolvency and Bankruptcy Code, 2016 is India's unified framework for time-bound resolution or liquidation of defaulting companies through the NCLT.
The IBC lets a financial or operational creditor take a defaulting company to the National Company Law Tribunal, where a resolution professional runs the firm while creditors seek a resolution plan within a statutory timeline. If no plan succeeds, the company goes into liquidation.
The IBC shifted control from defaulting promoters to creditors and improved recovery on some large stressed accounts referred by the RBI. Outcomes vary: some cases yield decent recoveries, others suffer large haircuts and delays beyond the prescribed timelines.
Related terms
- SARFAESI ActThe SARFAESI Act lets banks and certain NBFCs enforce security and seize a defaulting borrower's pledged assets without going through the courts.
- National Company Law Tribunal (NCLT)The NCLT is the adjudicating authority for corporate insolvency under the IBC and for company-law matters such as mergers and oppression cases.
- Committee of Creditors (CoC)The Committee of Creditors is the body of financial creditors that decides the fate of a company in insolvency, including approving or rejecting resolution plans.
- Haircut (Resolution)A haircut is the portion of their dues that lenders forgo when a stressed loan is resolved, settled or sold below its full value.
Plain-English explainer from The Dispatch Investors Encyclopedia. General information, not financial advice.