Cession of Property

IBC, 2016 — Part III; Presidency Towns Insolvency Act, 1909

In personal insolvency under the IBC or the Presidency Towns Insolvency Act/Provincial Insolvency Act, the insolvent's estate (all property) vests in the Resolution Professional or Official Assignee. The debtor effectively "cedes" their assets to the insolvency estate for distribution to creditors. Certain properties (tools of trade, personal effects up to a prescribed limit) are exempt from cession.

In practice, cession is what happens to a debtor's estate the moment a personal-insolvency order takes effect: the individual stops controlling their own assets and they vest in the Resolution Professional or Official Assignee for rateable distribution among creditors. For a creditor, this is double-edged — it pools every asset for orderly distribution, but it also strips the creditor of any unilateral self-help; recovery must thereafter run through the insolvency estate, not separate execution. For the debtor, cession is the price of the moratorium-style protection that personal insolvency offers. Counsel must watch the exemptions (tools of trade, basic personal effects up to a prescribed limit), since assets a creditor assumes are available may be carved out. Getting the timing wrong matters: transfers made by the debtor on the eve of cession are vulnerable to being clawed back into the estate. Well-advised creditors map which assets actually vest, and which are exempt, before assuming a recovery figure under Part III of the IBC.