Corporate Insolvency Resolution Process

The Corporate Insolvency Resolution Process is a time-bound mechanism for resolving the insolvency of a corporate debtor under the Insolvency and Bankruptcy Code, 2016. It seeks to preserve the business as a going concern, maximise asset value and balance stakeholder interests rather than immediately liquidating the company.

Initiation and admission

CIRP begins when a corporate debtor commits a default of at least the notified threshold of ₹1 crore.

• A financial creditor, operational creditor or corporate applicant may apply under Sections 7, 9 or 10, respectively.
• An operational creditor must first deliver the prescribed demand notice; a pre-existing dispute may prevent admission of its application.
• The National Company Law Tribunal admits a complete application when the statutory conditions are satisfied, and the insolvency commencement date begins on admission.

Moratorium and creditor control

Admission shifts the process from debtor control to creditor supervision through an insolvency professional.

• The tribunal declares a Section 14 moratorium, which bars specified proceedings and enforcement actions against the corporate debtor.
• An interim resolution professional takes control of management, makes a public announcement, receives claims and constitutes the Committee of Creditors.
• The Committee of Creditors, consisting primarily of financial creditors, supervises major decisions, while the resolution professional operates the debtor as a going concern and invites resolution plans.

Resolution, approval and liquidation

Prospective applicants satisfying Section 29A eligibility requirements may submit plans for restructuring the debtor and settling stakeholder claims.

• The Committee of Creditors evaluates the feasibility and viability of plans and may approve one by at least 66 per cent of its voting share.
• The tribunal approves a compliant plan under Section 31, after which it becomes binding on the corporate debtor, creditors, employees, guarantors and government authorities concerned.
• The Code provides 180 days, a possible extension of up to 90 days, and an outer framework of 330 days including time spent in legal proceedings.
• Failure to obtain approval within the permitted period, rejection of the plan, or a qualifying creditor decision to liquidate leads to liquidation.