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Introduction

Insolvency is a sensitive phase for any business, requiring strategic, legal, and financial expertise to ensure fair resolution. The Insolvency and Bankruptcy Code (IBC), 2016 has streamlined the process in India, but successful navigation still demands careful handling. At B.G. Shetty & Co., we assist businesses and stakeholders in managing insolvency proceedings with professionalism, clarity, and compliance.

Key Steps in the Insolvency Process

• Filing an Application: Insolvency can be initiated by creditors or the corporate debtor itself by filing an application with the National Company Law Tribunal (NCLT).

• Appointment of an Interim Resolution Professional (IRP): Upon admission, an IRP is appointed to take control of the debtor's management and preserve the company’s value.

• Formation of the Committee of Creditors (CoC): Creditors come together to form the CoC, which is empowered to make critical decisions about the future of the debtor.

• Preparation of a Resolution Plan: Prospective resolution applicants submit plans to revive the company. These plans must meet the approval of the CoC.

• Approval or Liquidation: If the CoC approves a resolution plan, it is implemented. If not, liquidation proceedings may follow.

Common Challenges Faced

• Tight Timelines: The IBC mandates strict timelines (typically 180 to 330 days), putting pressure on all stakeholders.

• Complex Stakeholder Interests: Balancing the interests of financial creditors, operational creditors, and shareholders requires careful negotiation.

• Maintaining Business Value: Operational disruption during insolvency can erode the value of the business unless managed proactively.

• Legal and Procedural Hurdles: Procedural lapses or incomplete documentation can derail insolvency proceedings.

Best Practices for Smooth Insolvency Management

• Early Intervention: Seeking professional advice at early signs of financial stress can prevent escalation.

• Meticulous Documentation: Maintaining updated financial records and compliance documents is critical.

• Transparent Communication: Timely and transparent communication with creditors and stakeholders builds trust and reduces disputes.

• Professional Guidance: Working with licensed Insolvency Professionals ensures compliance, strategy, and protection of interests.

Conclusion

Insolvency resolution is a complex journey, but when approached with diligence, expertise, and legal awareness, it can offer a valuable second chance to businesses and creditors alike. At B.G. Shetty & Co., we bring structured processes, regulatory expertise, and a commitment to fairness to every insolvency case we handle — ensuring outcomes that are efficient, ethical, and value-driven.