Corporate Insolvency Resolution Process (CIRP)

The Corporate Insolvency Resolution Process (CIRP) is the time-bound restructuring mechanism under the Insolvency and Bankruptcy Code (IBC), 2016, initiated when a financial creditor, operational creditor, or the corporate debtor itself files an application before the National Company Law Tribunal (NCLT) establishing that the company has defaulted on debts of ₹1 crore or above. Once NCLT admits the CIRP application, an Insolvency Resolution Professional (IRP) is appointed to manage the company's affairs, a moratorium period freezes all existing legal proceedings and debt recovery actions, and a Committee of Creditors (CoC) comprising the financial creditors is formed to oversee the process. The IRP invites resolution plans from prospective buyers within the 180-day statutory timeline (extendable to 330 days in exceptional cases). The CoC evaluates resolution plans and must approve one with 66% voting by value — the approved plan is then submitted to the NCLT for final judicial sanction. If no viable resolution plan is approved within the timeline, the company proceeds to liquidation. For Indian equity investors, CIRP initiation for a listed company is almost invariably a severe negative event — equity shareholders are last in the creditor priority for recovery, and most successful IBC resolutions result in existing equity being cancelled entirely, making the stock virtually worthless for ordinary shareholders while financial creditors recover a fraction of their dues.