Corporate Insolvency is a state where an organization is unable to meet its outstanding financial, operational or any other debt towards the lenders as it becomes due.

In such a situation if the stakeholders are able to make rational and quick decisions to deal with the same, a law to deal with the insolvency situation and intervention of the courts may not be required.

However, in most cases, the stakeholders fail to take such decisions to deal with the situation of insolvency and, therefore, the requirement for Corporate Insolvency Law occurs.


  • The foremost objective of the Corporate Insolvency Regime ought to protect the interest of the creditors by reorganizing viable businesses to the extent possible and should quickly liquidate the hurdles. Early realization of the insolvency process also shields the interest of the other stakeholders, i.e., employees and shareholders.
  • A corporate insolvency regime must help in promoting the growth of the economy through efficient reallocation of resources, which otherwise remain locked in the closed entities.
  • An efficient Corporate Insolvency Regime ameliorates the rights of the creditors and incentivizes them to increase the supply of credit in the market. Ergo, not only the supply of credit in the market improves, but also the cost of credit also reduces improving the viability and competitiveness of the businesses.
  • Simultaneously, it improves the business environment and therefore, encourages entrepreneurship. Furthermore, the same also results in improving investor confidence.



An application is made to NCLT for the initiation of Insolvency proceedings.

  • A financial creditor or an operational creditor or the corporate debtor may initiate a corporate insolvency resolution process in case a default is committed by the corporate debtor.
  • NCLT engages in appointing an interim Insolvency Professional (IP) within 14 days of acceptance of the application. Interim IP holds office for 30 days only.
  • Public Announcement is given within 3 days from the date of appointment of Interim Resolution Professional, inviting claims of the stakeholders.
  • IRP to appoint two registered valuers within 7 days of his appointment.
  • Duties of Interim Resolution Professional as per section 18 of Chapter 2:

Collect all information relating to the assets, financial and operations of the corporate debtor for determining the financial position of the corporate debtors, including information relating to business operations for the past two years, financial and operational payment for the past two years, list of the assets and liabilities as on the initiation date and such other matters as may be specified.

Verify the claim within 7 days of the last receipt of the claim and maintain the list of creditors along with the amount of claimed by them and the amount of claim admitted.

  • The list of Creditors is to be displayed on the website, if any, of the Corporate Debtor, filed with the Adjudicating Authority and presented at the first meeting of the Committee.
  • Resolution Professional shall be appointed in the 1st meeting of creditors.
  • A resolution applicant may submit a resolution plan to the resolution professional based on Information Memorandum 30 days before the expiry of the maximum period [180 days/270 days (in case of extension)].
  • Mandatory Contents of the Resolution Plan are Insolvency Resolution Cost, Liquidation Value,¬†Terms of Plan and its implementation schedule, management, and control of the business of the corporate debtor and adequate means for supervising its implementation.
  • The resolution professional shall submit a resolution plan to the Adjudicating Authority with the certification that contents meet the requirements of the Code and the regulations and the resolution plan that has been approved by the Committee of Creditors.
  • Where the Adjudicating Authority before the expiry of the Insolvency Resolution Process period or the maximum period permitted for completion of the CIRP does not receive a resolution plan it may pass an order for liquidation of Corporate Debtor.

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