Corporate Rescue Mechanisms Under The Companies Act, 2013: Tracing The Evolution Toward The Insolvency And Bankruptcy Code, 2016

Abstract

Legal actions intended to rehabilitate financially troubled but viable businesses, mostly through restructuring as opposed to liquidation, are referred to as corporate rescue. The Companies Act, 1956, marked the beginning of India's legislative journey in this field by providing for court-approved agreements and concessions that permitted businesses to rearrange their ownership and debt arrangements. Sections 230 to 240 of the Companies Act of 2013 significantly improved and unified these rules in order to protect stakeholder interests and enable prompt restructuring. With the creation of the National Company Law Tribunal (NCLT) under the 2013 Act, corporate adjudication became more specialized and effective. Procedural delays, disjointed forums, and a lack of a strong, cohesive insolvency procedure were among the issues that continued to exist, nevertheless. The bankruptcy and Bankruptcy Code (IBC), 2016, which established a time-bound and creditor-centred bankruptcy framework for businesses, was enacted as a result of these problems. This paper argues that by including the concepts of openness, equity, and organized corporate rescue, the Companies Act of 2013 established crucial procedural and legal foundations for India's contemporary insolvency framework. Later, this framework developed into the more organized and successful IBC regime.