Insolvency (CIRP & NCLT)

The corporate insolvency resolution process (CIRP) is the procedure under the Insolvency and Bankruptcy Code, 2016 for a company that has defaulted on its debts. Once the National Company Law Tribunal (NCLT) admits an application, the board's powers are suspended and a resolution professional runs the company while its creditors decide whether to accept a resolution plan or send it into liquidation.

An application can be filed by a financial creditor, an operational creditor or the company itself. On admission, a moratorium halts most legal actions against the company, an interim resolution professional takes charge, and a committee of creditors (CoC) is formed. The Code sets a time limit for the process, which tribunals frequently extend.

Listed companies must disclose each stage to the exchanges: the filing of the application, its admission, meetings of the committee of creditors, and the approval or rejection of a resolution plan.

For shareholders the order of claims matters. Secured creditors and other lenders are paid before equity, and resolution plans often reduce existing shareholders' stake to little or nothing, or delist the company.

How stocks tend to react

Admission into insolvency is usually strongly negative for the stock. Later stages depend on the resolution plan: the terms offered to existing shareholders, not the fact of a resolution, decide whether the equity retains value.

MarketPing measures this instead of guessing: every analysed announcement carries the stock's actual price reaction across 14 horizons, and the Reaction Lab aggregates how each category of announcement has historically moved stocks.

See it happening now

Red flags on Discover → — the NSE and BSE companies that filed one recently, each with its filing and the measured price reaction.

Related terms

Educational content, not investment advice. Regulations and tax rules change — verify current rules before acting.