The Insolvency and Bankruptcy Code, 2016 (“IBC”) completed its fourth anniversary in December 2020. As it enters its fifth year, one cannot help but look back at what a monumental impact this legislation has had on the Indian insolvency and liquidation landscape, and consequentially, the Indian economy.
Over the past four-year period, more than 4000 corporate insolvency resolution processes (“CIRP”) have commenced under the IBC as per statistics provided by the Insolvency and Bankruptcy Board of India (“IBBI”). Of these, over 275 CIRPs have resulted in an approved resolution plan, more than 1000 companies have gone into liquidation (although about 74% of them were already defunct or undergoing restructuring before the Board of Industrial and Financial Reconstruction), and almost 300 cases have been withdrawn from the CIRP. The average timeline for approved resolution plans is about 384 days i.e., less than 11 months, and the average recovery rate during the CIRP by financial creditors has been almost 44% of their claims. This is a marked improvement over the erstwhile regime of winding up under our company law where it took several years for winding up a company and financial creditors on an average received about a quarter of their claims.
Please click here to read the full article authored by Aashit Shah, published in Legal Era Insights magazine.
Aashit chairs the Finance Practice at JSA. He specialises in banking & finance, debt restructuring and insolvency, mergers & acquisitions, private equity and investment funds.