Insolvency is occurring when the cash inflows of a person are less than his cash outflows. Insolvency is reflected in cash flow crisis, loss of business contracts, fall in sales, loss of customers, and poor credit ratings.

Insolvency in the case of a company arises when there is a continuous decline in sales and the company lacks enough working capital to finance its regular operations for which the company raises loans from financial institutions. By reducing cost, selling assets at reasonable prices, raising finance, negotiating debt, and getting acquired by larger corporations’ insolvency can be reversed.


It refers to the legal proceeding concerning a person who is not able to meet the financial obligations or maybe he has no such prospect of being able to repay the debts in the future when they fall due. It is the final stage of insolvency. It gives a new start; it relieves the individual or a company from all the debts and other disadvantages of insolvency. Assets of the debtor are measured and evaluated and these are used for the repayment of a part of the debt, the person or entity owed to their creditor.

The Insolvency and Bankruptcy Code, in the year 2016 (IBC), is India’s bankruptcy law, which tries to consolidate the present framework structure by creating a simple law for insolvency and bankruptcy matter. The bankruptcy code is the best stop solution for solving insolvencies which previously was a long and tedious process that did not offer economic development and upliftment and it is offered by preferential creditors. The IBC overall is made up of 255 sections and 11 Schedules.


Insolvency Resolution:

The Code shows separate insolvency resolution processes and procedures for common individuals, companies, and partnership leaders. The process can be initiated by either the debtor or the creditors easily. A maximum time limit, for the overall completion of the insolvency resolution process, has been exactly set for corporates and individuals involved in these processes. The Insolvency and Bankruptcy Code Act, in 2019 has freshly increased the mandatory upper Time limit of 330 days including the time completely spent in the legal process to complete resolution.

Insolvency regulator:

 The Code develops the Insolvency and Bankruptcy Board of India, to overlook the insolvency proceedings in the country and regulate the entities marked under it. The Board consists of 10 members, including representatives from the Ministries of Finance and Law, and the Reserve Bank of India.

Insolvency professionals:

The insolvency process will be strictly managed by licensed professionals. The professionals can control the assets of the debtor throughout the insolvency process.

Bankruptcy and Insolvency Adjudicator:

The Code proposes two separate important tribunals to overlook the overall resolution process:

  1. The National Company Law Tribunal mainly for Companies and Limited Liability Partnership firms.
  2. The Debt Recovery Tribunal for individuals and partnerships respectively.

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