Skip to content

CS Professional · Corporate Restructuring, Valuation and Insolvency

Insolvency Chapter for CS Professional Paper 6

Insolvency in Paper 6 covers the Insolvency and Bankruptcy Code, 2016 and the regime for insolvency professionals. You learn who regulates them (the Board), how insolvency professional agencies are registered and governed, what professionals do, and their code of conduct. Solve questions by stating the provision, applying it to the facts, and concluding.

What this chapter covers

This chapter deals with the people who run insolvency processes under the Insolvency and Bankruptcy Code, 2016. It starts with a short view of the Code, then moves to the insolvency professional (IP), the insolvency professional agency (IPA) that enrols the IP, and the Insolvency and Bankruptcy Board of India (the Board) that regulates both.

The chapter is built on a small set of sections in the Code. Section 196 lists the powers and functions of the Board. Sections 199, 200, 203 and 204 deal with agencies: registration, principles, governing board and functions. Sections 207 and 208 deal with the registration, functions and obligations of professionals. Section 244 covers transitional powers.

It connects to the rest of Paper 6 because every process in the Insolvency, Liquidation and Winding Up part is run by an insolvency professional. If you know who the IP is, who oversees the IP and what duties the IP owes, the later chapters on corporate insolvency resolution, liquidation and fresh start become easier to follow. The same facts also feed Elective 7.5 if you choose it.

The chapter is section-based, so you can learn it exactly and write it fast. Written papers reward the correct provision, applied to the facts and followed by a clear conclusion. Questions on who registers whom, what an agency must do, or what an IP must abide by can be answered with a few precise points. Insolvency, Liquidation and Winding Up is a full part of Paper 6, so a solid base here helps you in the later chapters as well.

Insolvency: topics in the order to study them

  1. 1Overview of the Insolvency and Bankruptcy Code, 2016Gives the frame: the processes under the Code and the bodies that run them, so later sections have a place to sit.
  2. 2Insolvency Professionals under the CodeIntroduces the IP and the two-step route of agency membership, then registration with the Board (section 207).
  3. 3Insolvency Professional Agencies: Registration PrinciplesExplains why an agency needs a certificate (section 199) and the principles the Board follows (section 200), along with the Board's powers in section 196.
  4. 4Governing Board of Insolvency Professional AgencyBuilds on agency registration with the Board's power to set the governing board structure (section 203), and then the functions an agency itself performs once registered (section 204).
  5. 5Functions and Obligations of Insolvency ProfessionalsMoves from institutions to the IP's actual work: the processes an IP handles under section 208(1).
  6. 6Code of Conduct and Disciplinary ActionEnds with the conduct duties in section 208(2). Keep the grounds for penalty and expulsion separate from that code. They come from the model bye-laws the Board may make under section 196(2): penalties in clause (h), expulsion in clause (j), grievance redressal in clause (i) and disciplinary proceedings in clause (p).

How to prepare Insolvency

Treat this as a section-by-section chapter. Aim to recall each provision in your own words, then practise applying it to short facts.

  1. Read the Code sections listed in the chapter once, slowly, and mark who does what: Board, agency or professional.
  2. Make a one-page chart of the three players with columns for registration, powers or functions, and obligations.
  3. Learn the lists as numbered points: the principles in section 200 (five), the agency functions in section 204 (seven) and the code of conduct in section 208(2) (five).
  4. Learn the processes an IP handles under section 208(1), and note which Chapter and Part of the Code each belongs to.
  5. Practise short case questions: give the provision, apply it to the facts, and state the conclusion in the last line.
  6. Write the lists from memory twice in the last week and check each point against the Code text.

Common mistakes in Insolvency

  • Mixing up the powers of the Board with the functions of an agency.

    Fix: Tag each point with its source: Board powers are in section 196, agency functions in section 204. Write the section number before the list.

  • Saying an IP registers with the Board directly.

    Fix: State the order every time: membership of an agency first, then registration with the Board under section 207(1).

  • Giving an incomplete code of conduct.

    Fix: Learn all five points in section 208(2) as a list and count them while writing.

  • Confusing the registration principles in section 200 with the agency functions.

    Fix: Remember that section 200 guides the Board when registering agencies, while section 204 describes what a registered agency does.

  • Listing processes an IP handles without matching them to the Code's chapters.

    Fix: Pair each process with its Chapter and Part, and remember that pre-packaged resolution was added later.

  • Writing general answers in case questions without a conclusion.

    Fix: Use the three-step format: provision, analysis of facts, conclusion in one clear sentence.

Last-day revision: Insolvency

  • The Board registers insolvency professional agencies, insolvency professionals and information utilities under section 196(1)(a).
  • No person may run an agency or enrol IPs without a certificate of registration from the Board (section 199).
  • Section 200 sets five principles for registering agencies, including promoting competent IPs, ethical conduct and protecting debtors and creditors.
  • An IP must first obtain membership of an agency and then register with the Board (section 207(1)).
  • The Board may specify categories of professionals with qualifications in finance, law, management, insolvency or another field (section 207(2)).
  • Section 203 lets the Board make regulations on the governing board, the minimum independent members and the number of IP members on it.
  • Section 204 lists the agency functions: membership, conduct standards, monitoring, safeguarding rights, suspension or cancellation, grievances and publishing information.
  • Section 208(1) covers fresh start, individual insolvency resolution, corporate insolvency resolution, pre-packaged resolution, individual bankruptcy and liquidation.
  • Code of conduct under section 208(2): reasonable care and diligence, comply with bye-laws, allow records inspection, submit proceeding records to the Board and agency, and perform as specified.
  • The Board may make model bye-laws for agencies to adopt under section 196(2). They can cover penalties (clause h), grievance redressal (clause i), expulsion (clause j) and disciplinary proceedings (clause p).
  • The Board has civil court powers for discovery, summoning, inspection and commissions (section 196(3)).
  • Until the Board exists, the Central Government exercises its powers (section 244(1)).

Insolvency practice questions

Insolvency in other exams

The same ground in other exams, if you are preparing for more than one or want another angle on it.

Insolvency: frequently asked questions

Is this chapter important for the CS Professional exam?

It supports the Insolvency, Liquidation and Winding Up part of Paper 6, which carries 40 marks. The chapter is based on specific sections, so you can learn the provisions exactly and write precise answers.

Do I need to memorise section numbers?

Learn the key ones, such as 196, 199, 200, 203, 204, 207 and 208, because they make answers precise. If you forget a number, still state the rule correctly in plain words.

Who registers insolvency professionals?

A person first becomes a member of an insolvency professional agency. The professional then registers with the Board within the time, manner and fee specified by regulations under section 207.

What is the best way to revise the code of conduct?

Learn the five points in section 208(2) as a numbered list. Then practise applying them to short facts, such as an IP refusing an inspection by the agency.