Insolvency refers to a situation where individuals or companies cannot repay back their outstanding debt obligations.

Criteria For Declaring

• Criteria for Corporate Insolvency (Companies & LLPs)
  • A minimum default of ₹1 Crore must exist for initiating the Corporate Insolvency Resolution Process (CIRP).
  • Can be initiated by a Financial Creditor (banks), Operational Creditor (suppliers/employees), or the Corporate Debtor itself.
• Criteria for Individual/Personal Insolvency
  • Applies to individuals and partnership firms where the default is ₹1,000 or more (the government may increase this threshold to a maximum of ₹1 Lakh).

Declaring Insolvency as per the Insolvency and Bankruptcy Code, 2016

• IBC covers individuals, companies, LLPs, and partnership firms under a single, consolidated framework, merging multiple earlier laws.
• Strict timelines:
  • Resolution must be completed in 180 days (extendable to 330 days in special cases, including litigation).
  • Special provisions for small companies and startups (90 days + 45 days).
  • Personal insolvency cases are to be resolved within 180 days through the Debt Recovery Tribunal (DRT).

Insolvency and Bankruptcy Board of India (IBBI)

• Regulates professionals and agencies, sets standards, and oversees proceedings.
• Formed as per the Insolvency and Bankruptcy Code (IBC), 2016.
• Composition
  • Chairperson: Appointed by the Central Government.
  • Government representatives: Three members from the Ministry of Finance, the Ministry of Corporate Affairs, and the Ministry of Law (ex officio).
  • RBI Representative: One member nominated by the Reserve Bank of India (ex officio).
  • Additional members: Five other members appointed by the Central Government, of which at least three must be full-time members.
• Tenure of Members
  • Chairperson and non-ex officio members serve for five years or until they reach the age of 65 years, whichever is earlier, and are eligible for re-appointment.

Source: The Hindu