The regulations concerning bankruptcy and insolvency in India were recently revised by the local authorities. Bankruptcy in India refers to the legal procedure through which the company’s representatives will go to a court and will declare that the respective business can no longer pay its debts. The manner in which bankruptcy is performed in this country is given by the Insolvency and Bankruptcy Code 2016. Our team of specialists in company formation in India can advise on the new regulations prescribed by the Code, which became applicable in this country starting with August 2016.
The Insolvency and Bankruptcy Code in India
When starting a company in India, the investors should take into consideration the risks associated with carrying the respective business activity, as it may lead to insolvency or bankruptcy. The Insolvency and Bankruptcy Code 2016 enforced new regulations for these procedures, making a clear distinction between the legal understandings of these two terms.
If insolvency is seen as a measure enforced for a short-term inability to repay certain debts, bankruptcy refers to a long-terminability. Our team of agents in company registration in India can further advise on the legal meaning of the bankruptcy procedure.
The Code was enforced in order to reduce the time spent on insolvency and bankruptcy procedures and to increase the level of investor confidence. At the same time, it creates a legal framework through which businesses may recover, offering a second chance to a company that has met certain financial difficulties.
However, both insolvency and bankruptcy can lead to liquidation, which is the official procedure through which a company operating in India is closed.
Key aspects of the Indian Code
The above mentioned legislation is enforced here by the Insolvency and Bankruptcy Board of India. Through this institution, the local authorities are imposing a new set of standards for agencies which handle these procedures.
The Code also establishes the order in which debts will be paid, as follows:
• secured creditor debts;
• debts paid to unsecured creditors;
• debts related to shareholders and partners.
Businessmen interested in receiving further information on the Indian bankruptcy procedure are invited to contact our team of consultants in India.