The Indian government leaves no stone unturned in strengthening the nation’s economy and improving the scope for budding and established businesses to operate easily. Compliance regulations in India are intricate and when we are talking about compliance in the corporate landscape, having a basic idea of laws that govern finances is everything to handle every aspect smoothly when anything goes wrong. Enterprises have to go through different obstacles when they run a business, and insolvency is one of them. Undoubtedly, insolvency lawyers in Mumbai can help you understand the implications and sort them out, but if you don’t want to be clueless when your finances are drained, and you are on the verge of bankruptcy, here’s a guide from the leading business lawyers!
A Brief Overview
Unless you are living under a rock in the business biosphere, you probably already know about the Insolvency and Bankruptcy Code (IBC) of 2016. The law marks a significant milestone in India’s legal framework, and it streamlines the insolvency process by resolving disputes concerning distressed assets. For businesses operating in India, understanding the implications of IBC is crucial because, before the enactment of IBC, the insolvency laws were fragmented and cumbersome, and multiple laws governed bankruptcy proceedings. However, the IBC consolidated these laws into a single comprehensive legislation and provided a unified framework for resolving insolvency.
Key Features of IBC
The IBC introduced several key features, including the establishment of the Insolvency and Bankruptcy Board of India (IBBI) to oversee insolvency proceedings, the creation of the National Company Law Tribunal (NCLT) and the National Company Law Appellate Tribunal (NCLAT) to adjudicate insolvency cases, and the introduction of time-bound resolutions.
Implications for Businesses
- For one, after the IBC of 2016, businesses experienced an expedited resolution process. The IBC insolvency proceedings had to be resolved within a strict timeframe that ensured a quicker resolution of distressed assets and less time and resources were spent on insolvency proceedings.
- In addition, the IBC prioritizes the rights of creditors, which offers a transparent and fair process for recovering debts. How is this advantageous for businesses? Well, this offers enterprises greater confidence in extending credit, when they know their interests are protected under the IBC.
- For businesses that want to expand or diversify their portfolio, IBC offers opportunities for acquiring distressed assets at favorable valuations. In fact, businesses can acquire assets at a fraction of their market value by participating in insolvency resolution.
- The IBC promotes greater corporate governance and accountability by holding defaulting companies and their promoters accountable for their actions. This encourages businesses to adopt sound financial practices and adhere to ethical standards, thereby reducing the incidence of insolvency.
Conclusion
There’s no denying that the insolvency and bankruptcy laws have far-reaching implications for businesses operating in India, but if you want to understand how these laws work, and you need professional assistance with the process, work with the top insolvency lawyers in Mumbai. Whether we are talking about insolvency laws or you are scouring the web for the top business lawyers, ensure to go for legal professionals who have profound experience in the industry and have an unscathed courtroom reputation.
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