iifl-logo

Invest wise with Expert advice

By continuing, I accept the T&C and agree to receive communication on Whatsapp

sidebar image

Out-of-court settlements become popular, as parties refrain from IBC proceedings

30 Nov 2022 , 10:41 AM

In cases of loan default, out-of-court deals are becoming the preference among creditors and debtors as parties look for ways to avoid initiation of the Insolvency and Bankruptcy Code (IBC).

According to the Insolvency and Bankruptcy Board of India (IBBI), as of September 31, 2022, 23,417 Corporate Insolvency Resolution Process initiation applications, with an aggregate default amount of Rs7.31 lakh crore were resolved before their admission.

The development comes as debtors become increasingly concerned about losing control of companies under the CIRP and the length of the resolution process.

When the CIRP is initiated, the company’s board of directors is dissolved and replaced by a committee of creditors. Following that, the lenders appoint a resolution professional to the company and its resolution process.

Out-of-court settlements generally include debt restructuring as well as the injection of new capital to keep the business operational. This only work if the company has good cash flows and a good governance record.

According to a senior bank executive, the CIRP is time-consuming, which frequently leads to further degradation of assets, lowering the recovery value. According to market participants, creditors are wary of the steep haircuts that may be imposed under IBC.

Creditors and investors are primarily concerned about the insolvency resolution timelines, which extended to two to three years.

For feedback and suggestions, write to us at editorial@iifl.com

Related Tags

  • CIRP
  • Companies
  • IBC
  • IBC Proceedings
  • Out-of-court Deals
sidebar mobile

BLOGS AND PERSONAL FINANCE

Read More

Invest wise with Expert advice

By continuing, I accept the T&C and agree to receive communication on Whatsapp

Knowledge Center
Logo

Logo IIFL Customer Care Number
(Gold/NCD/NBFC/Insurance/NPS)
1860-267-3000 / 7039-050-000

Logo IIFL Capital Services Support WhatsApp Number
+91 9892691696

Download The App Now

appapp
Loading...

Follow us on

facebooktwitterrssyoutubeinstagramlinkedintelegram

2025, IIFL Capital Services Ltd. All Rights Reserved

ATTENTION INVESTORS

RISK DISCLOSURE ON DERIVATIVES

Copyright © IIFL Capital Services Limited (Formerly known as IIFL Securities Ltd). All rights Reserved.

IIFL Securities Limited - Stock Broker SEBI Regn. No: INZ000164132, PMS SEBI Regn. No: INP000002213,IA SEBI Regn. No: INA000000623, SEBI RA Regn. No: INH000000248
ARN NO : 47791 (AMFI Registered Mutual Fund Distributor)

ISO certification icon
We are ISO 27001:2013 Certified.

This Certificate Demonstrates That IIFL As An Organization Has Defined And Put In Place Best-Practice Information Security Processes.