IMPACT OF THE “INSOLVENCY AND BANKRUPTCY CODE” ON CORPORATE GOVERNANCE PRACTICES

AUTHOR – UVIKA SINHA, STUDENT AT AMITY UNIVERSITY, NOIDA

BEST CITATION – UVIKA SINHA, IMPACT OF THE “INSOLVENCY AND BANKRUPTCY CODE” ON CORPORATE GOVERNANCE PRACTICES, INDIAN JOURNAL OF LEGAL REVIEW (IJLR), 5 (5) OF 2025, PG. 858-865, APIS – 3920 – 0001 & ISSN – 2583-2344

1.1 ENHANCED BOARD ACCOUNTABILITY POST-INSOLVENCY

The “Insolvency and Bankruptcy Code, 2016 (IBC)”, has had an impact on “corporate governance” as it made the board of directors in insolvency cases more accountable. Prior to the passage of the IBC, corporate governance structures did not typically provide proper board oversight in financially stressed firms, thus resulting in mismanagement and delay in dealing with financial instability. The IBC has brought a formalized process of corporate insolvency resolution, where the directors are made to adhere to fiduciary duties and ensure clear decision-making. “Section 17 of the IBC” requires that on the admission of a CIRP, the authority of the “board of directors” is suspended and control over the corporate debtor is transferred to the “resolution professional (RP)”.^[1]

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[1] Rajeshwar Rao, “Rajeshwar Rao: Strengthening the Insolvency and Bankruptcy Code (IBC) framework for effective resolution,” 2024 available at: https://www.bis.org/review/r241218g.htm (last visited March 31, 2025).