Insolvency and Bankruptcy Code
India's 2016 law establishing a time-bound process for resolving corporate insolvency or liquidating the company.
How it is identified
Test: on admission of a default, a resolution professional takes control and a resolution plan must be approved within the prescribed period or liquidation follows
Unit
qualitative
In depth
The code replaced a slow, creditor-unfriendly regime with a creditor-in-control process: once a case is admitted, the existing management loses control to a resolution professional and a committee of creditors decides the outcome. Equity shareholders have no role in that committee and are frequently wiped out entirely in an approved resolution plan, which is the outcome most retail holders do not anticipate. The statutory timeline is 330 days including litigation, though cases have run considerably longer. A share continuing to trade after admission is pricing the small probability of a plan that preserves some equity value.
Worked example
A resolution plan writes equity down to zero and hands the company to a new owner. The shares continue trading until the plan takes effect, and holders who bought during that period receive nothing.
Illustrative figures, chosen so the arithmetic is easy to follow. Not a live price and not a valuation of any company.
Educational reference only
This entry explains what “Insolvency and Bankruptcy Code” means. It is not investment advice and not a recommendation to buy or sell any security. Any numbers above are illustrative, not live prices, and nothing here predicts price direction or rates a stock. Consider your own circumstances and consult a SEBI-registered investment adviser before acting.