Insolvency

Corporate insolvency in India runs on a defined statutory timeline under the Insolvency and Bankruptcy Code, and different parties enter the process from different positions: a financial creditor seeking recovery, an operational creditor owed for goods or services supplied, or a corporate debtor facing the process itself.

Initiating and running the process

A corporate insolvency resolution process begins with an application before the National Company Law Tribunal, filed by a financial creditor, an operational creditor, or the corporate debtor itself. Once admitted, a resolution professional takes over management of the company, a moratorium applies to proceedings against it, and creditors are organised into a committee that evaluates and votes on resolution plans submitted by prospective resolution applicants. Representation at this stage involves advising a creditor on its claim and its position on the committee, or advising a resolution applicant on the terms of a plan it proposes to submit.

Where resolution does not succeed

If no resolution plan is approved within the statutory timeline, or the process otherwise fails, the company moves into liquidation, and the analysis shifts to the priority in which the liquidation estate is distributed among the categories of creditors set out in the Code's waterfall.

Related proceedings

The Code also extends to personal guarantors of corporate debt, who can be subject to an insolvency process of their own tied to the underlying corporate default, and to restructuring proposals that lenders and borrowers may pursue as an alternative to a full insolvency filing. Where a corporate group has more than one entity in financial difficulty, the insolvency of one can affect the position of related domestic or overseas entities, which is a separate layer of analysis from the insolvency of the single company before the Tribunal. What a creditor or a debtor has to decide, at each stage, is which forum and which procedural option actually serves its recovery or continuity objective, since the Code offers more than one route and they do not all lead to the same outcome.