An Analysis of the Need for Creditor’s Protection

Creditors are individuals or entities other than company members who are owed money by a company. They can include those who have lent money, sold goods, or provided services to the company. Creditors are typically external to the company, but a member can also become a creditor if they have lent money to the company that is still outstanding. There are four types of creditors, viz., Secured creditors, Unsecured creditors, Financial Creditors, and Operational creditors. They have enjoyed several rights under the Companies Act of 2013, the Insolvency and Bankruptcy Code of 2016, the SARFAESI Act of 2002, etc. Creditor's rights not only protect their interests against debtors but also within themselves. Some of the rights available under the Indian Companies Act, 2013 are Creditor’s meeting, preference in payment, the appointment of a liquidator, the right to make decisions affecting creditor's interest, and the right to nominate directors, and control over corporate spending This article will discuss the definition of creditors, the different types of creditors, the need for creditor protection, and the rights available to the creditors in the Companies Act of 2013.