What is CIRP? A plain-language guide to corporate insolvency in India

If a company can't pay its debts, the Insolvency and Bankruptcy Code, 2016 (IBC) provides a structured, time-bound way to either rescue it or wind it up fairly. That process is called the Corporate Insolvency Resolution Process — CIRP. Here's how it actually works, in plain English.

What does CIRP mean?

CIRP is the formal legal process under the IBC through which a financially distressed company (the "corporate debtor") is taken into a collective resolution process supervised by the National Company Law Tribunal (NCLT). The goal is simple to state and hard to achieve: maximise the value of the company's assets while treating all creditors fairly — ideally by reviving the business under new management rather than shutting it down.

Who can start a CIRP?

An application to begin CIRP can be filed before the NCLT by:

• A financial creditor (e.g., a bank or lender) under Section 7;
• An operational creditor (e.g., a supplier or employee) under Sections 8 and 9; or
• The corporate debtor itself under Section 10.

There is a minimum default threshold (currently ₹1 crore) below which a CIRP cannot be triggered.

The CIRP process, step by step

1. Admission & the moratorium

Once the NCLT is satisfied that a genuine default exists, it admits the application. From that moment, a moratorium under Section 14 kicks in — a legal "calm period" during which no one can file suits, enforce security, or recover assets against the company. This protects the company so a resolution can be attempted without it being torn apart by individual creditors.

2. Appointment of the Insolvency Professional

An Interim Resolution Professional (IRP) is appointed and the powers of the board of directors are suspended. The IRP takes control, runs the company as a going concern, and makes a public announcement inviting creditors to submit their claims.

3. Forming the Committee of Creditors (CoC)

The IRP verifies the claims and constitutes the Committee of Creditors — made up of the financial creditors, with voting rights in proportion to the debt owed to them. The CoC is the key decision-making body in a CIRP. It confirms or replaces the IRP as the Resolution Professional (RP).

4. Inviting and evaluating resolution plans

The RP prepares an Information Memorandum and invites prospective resolution applicants to submit plans to take over and revive the company. Each plan must comply with Section 30(2) — paying insolvency costs first, giving operational and dissenting creditors at least their liquidation value, and being feasible and lawful.

5. CoC approval & NCLT sanction

The CoC votes on the plans using its commercial wisdom. A plan needs at least a 66% vote to be approved. Once approved, it goes to the NCLT under Section 31; on sanction, the plan becomes binding on everyone — and the company continues under its new owners with a clean slate.

6. Resolution — or liquidation

If a viable plan is approved, the company is revived. If no plan is approved within the statutory timeline, the company moves to liquidation, where its assets are sold and proceeds distributed in the order set by Section 53.

Why the process matters

Before the IBC, recovering money from a failing company in India could take years with poor outcomes. The CIRP shifted the model from "debtor-in-possession" to "creditor-in-control," giving creditors a transparent, time-bound mechanism — and giving viable businesses a genuine second chance under new ownership.