Insolvency and Bankruptcy Code, 2016: Overview
Five Parts, one tribunal for companies, a ₹1 crore threshold and a clock on every step. The map for every other IBC topic.
The Insolvency and Bankruptcy Code, 2016 (Act 31 of 2016) replaced a scatter of winding-up, sick-company and recovery laws with one statute. Its long title states the aim: resolve the insolvency of corporate persons, partnership firms and individuals in a time-bound manner, for maximisation of the value of their assets.
For the Limited Insolvency Examination this overview is the frame every other topic hangs on. IBBI tests the Code as it stood on 4 February 2025. The Code has been amended since, by the IBC (Amendment) Act, 2026, so this page flags both versions where they differ.
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The Five Parts of the Code
Most of the syllabus, and most case studies, sit in Part II.
I (ss. 1-3)
Covers
Short title, extent, definitions used across the Code
Adjudicating Authority
Not applicable
II (ss. 4-77A)
Covers
Corporate persons: CIRP, liquidation, pre-packaged process, voluntary liquidation, offences
Adjudicating Authority
NCLT (s. 60), which also hears personal guarantors to corporate debtors
III (ss. 78-187)
Covers
Individuals and partnership firms: fresh start, insolvency resolution, bankruptcy
Adjudicating Authority
DRT, except personal guarantors to corporate debtors
IV (ss. 188-223)
Covers
IBBI, insolvency professionals, IP agencies, information utilities
Adjudicating Authority
Regulatory, not adjudicatory
V (ss. 224-255)
Covers
Miscellaneous: the Insolvency and Bankruptcy Fund, power to make rules and regulations, amendments to other laws
Adjudicating Authority
Not applicable
| Part | Covers | Adjudicating Authority |
|---|---|---|
| I (ss. 1-3) | Short title, extent, definitions used across the Code | Not applicable |
| II (ss. 4-77A) | Corporate persons: CIRP, liquidation, pre-packaged process, voluntary liquidation, offences | NCLT (s. 60), which also hears personal guarantors to corporate debtors |
| III (ss. 78-187) | Individuals and partnership firms: fresh start, insolvency resolution, bankruptcy | DRT, except personal guarantors to corporate debtors |
| IV (ss. 188-223) | IBBI, insolvency professionals, IP agencies, information utilities | Regulatory, not adjudicatory |
| V (ss. 224-255) | Miscellaneous: the Insolvency and Bankruptcy Fund, power to make rules and regulations, amendments to other laws | Not applicable |
The Processes Under Part II
- Corporate insolvency resolution process (CIRP)
- Triggered on a default of at least the threshold amount by a financial creditor (s. 7), an operational creditor (s. 9) or the corporate debtor itself (s. 10). Creditors decide whether a resolution plan rescues the business.
- Pre-packaged insolvency resolution process
- Chapter III-A (ss. 54A-54P), added in 2021 for MSMEs. The debtor stays in control while a plan is negotiated before the NCLT is approached.
- Liquidation
- Chapter III (ss. 33-54). Follows a failed CIRP, a CoC decision to liquidate, or a contravened plan. Proceeds are distributed under the section 53 waterfall.
- Voluntary liquidation
- Chapter V (s. 59). A solvent corporate person closes itself down.
- Fast track CIRP
- Chapter IV (ss. 55-58). Part of the exam syllabus at the cut-off; omitted by the 2026 Amendment Act with effect from 26 May 2026.
Threshold and Core Principles
Section 4 applies Part II where the minimum default is ₹1 lakh, and lets the Central Government raise it up to ₹1 crore. By notification S.O. 1205(E) of 24 March 2020 it did exactly that: ₹1 crore is the current minimum default for a CIRP.
Three ideas run through the whole Code. Control shifts from debtor to creditor: once a CIRP starts, the board is suspended and an insolvency professional runs the company. Decisions on the business belong to the committee of creditors, made up of financial creditors. And every stage has a clock, because value falls the longer a stressed company drifts.
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Amendments That Shape the Exam
Act 26 of 2018
In force from
6 June 2018
What it did
Voting thresholds cut from 75% to 66%; s. 12A withdrawal at 90%; homebuyers' money treated as financial debt
Act 26 of 2019
In force from
16 August 2019
What it did
330-day outer limit in s. 12; minimum payout to operational creditors in s. 30(2)(b)
Act 1 of 2020
In force from
28 December 2019
What it did
Joint filing rule for allottees and class creditors in s. 7; s. 32A immunity for the corporate debtor
Act 26 of 2021
In force from
4 April 2021
What it did
Pre-packaged insolvency resolution process for MSMEs
Act 6 of 2026
In force from
26 May 2026 (most provisions)
What it did
14-day admission duty in s. 7, new s. 12A, CoC continuing in liquidation, fast track omitted. After the exam cut-off
| Amending law | In force from | What it did |
|---|---|---|
| Act 26 of 2018 | 6 June 2018 | Voting thresholds cut from 75% to 66%; s. 12A withdrawal at 90%; homebuyers' money treated as financial debt |
| Act 26 of 2019 | 16 August 2019 | 330-day outer limit in s. 12; minimum payout to operational creditors in s. 30(2)(b) |
| Act 1 of 2020 | 28 December 2019 | Joint filing rule for allottees and class creditors in s. 7; s. 32A immunity for the corporate debtor |
| Act 26 of 2021 | 4 April 2021 | Pre-packaged insolvency resolution process for MSMEs |
| Act 6 of 2026 | 26 May 2026 (most provisions) | 14-day admission duty in s. 7, new s. 12A, CoC continuing in liquidation, fast track omitted. After the exam cut-off |
Not Everything in the 2026 Act Is in Force
The commencement notification of 22 May 2026 left out the new creditor-initiated insolvency resolution process (Chapter IV-A) and group insolvency (Chapter VA). Treat both as enacted but not yet operative until a further notification appears. Neither is tested in the current exam series.
How the Limited Insolvency Examination Tests This
Overview questions are usually one-mark items: which Part governs a personal guarantor, which forum hears an individual's insolvency, what the current default threshold is. The trap is mixing up forums (NCLT for corporate persons and their personal guarantors, DRT for other individuals) and quoting the old ₹1 lakh figure.
In the case studies, the overview matters because the first question often asks which process applies to the facts at all. Identify the debtor (company, LLP, individual, guarantor), the creditor type and the amount in default before reaching for any section.
FAQs
What is the Insolvency and Bankruptcy Code, 2016?expand_more
A single law for resolving the insolvency of companies, LLPs, partnership firms and individuals in a time-bound way. Part II covers corporate persons, Part III individuals and firms, and Part IV sets up IBBI and the professionals who run the processes.
What is the minimum default to start insolvency against a company?expand_more
₹1 crore, under section 4 read with the Central Government notification of 24 March 2020. The section itself still says ₹1 lakh, which is why candidates who read only the bare Act get this wrong.
Which tribunal decides IBC cases?expand_more
The NCLT for corporate persons and for personal guarantors to corporate debtors (section 60). The DRT for other individuals and partnership firms. Appeals go to the NCLAT and the DRAT respectively, then to the Supreme Court.
Does the 2026 amendment apply in the Limited Insolvency Examination?expand_more
No. The exam tests the law as it stood on 4 February 2025. The 2026 Act came into force, in large part, on 26 May 2026, after that date.
Next steps
- CIRP Stepsarrow_forward
- Initiating CIRParrow_forward
- IBC Amendment 2026arrow_forward
- Syllabusarrow_forward
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