Understanding, What is Insolvency and Bankruptcy Code (IBC) in India

Have you ever read in the news that a company “has been taken under IBC ” and wondered what it actually means? Many people hear the term “IBC” in business or commercial news but have no idea what it stands for or why it matters. This blog breaks it down in plain language so you can understand it easily. 

What’s IBC?

The Insolvency and Bankruptcy Code is a law in India that provides a structured framework for resolving insolvency when a business or individual is unable to repay its debts. It allows debtors to reorganize or terminate their business while ensuring creditors can collect their claims in an orderly manner. 

Why Was the IBC Law Introduced?

 The law was designed to expedite debt settlement, safeguard creditors’ funds, and provide businesses and individuals with a fair, structured process for repaying or restructuring their debts. 

How Does IBC Help Companies?

• If companies are unable to pay back debts, IBC offers a legal structure.

• Resolution experts are able to find purchasers for the business.

• The structure permits corporate restructuring.

• If needed, it also permits an orderly shutdown.

• Throughout the procedure, IBC protects the business and its creditors.

How Does IBC Help Individuals?

• Those who are unable to pay back their debts are assisted by the Insolvency and Bankruptcy Code (IBC).
• It offers a methodical legal procedure for settling financial disputes.

• The procedure guarantees prompt and equitable settlement between creditors and debtors.
• It seeks to effectively settle unpaid obligations while safeguarding both parties.

Let’s Understand IBC with an Example

Suppose a company called ABC Fabrics has taken large loans from multiple banks but is unable to repay them. The banks started a legal process to resolve the debt They helped the company to restructure its loans to continue operations.

Frequently Asked Questions (FAQ)

Q1. What does IBC stand for? 

 IBC stands for the Insolvency and Bankruptcy Code, a law that addresses debt-related issues. 

 Q2. When is IBC used? 

 IBC is used when a company or entity is unfit to repay its debts. 

 Q3. Why is IBC important? 

 It ensures a fair, time-bound outcome for debt recovery and resolution.