Why India Is Finally Moving Toward a Coherent Framework for Corporate Groups Under Stress
India’s insolvency ecosystem is on the verge of a major structural upgrade. While the Insolvency and Bankruptcy Code (IBC) has transformed single-entity resolution, it has struggled with one stubborn reality: large Indian businesses operate as interconnected groups, not isolated companies.
When one entity fails, it often pulls several others down with it. Yet each entity is pushed through separate, siloed CIRPs, resulting in:
- fragmented decision-making,
- duplication of effort,
- wasted value due to uncoordinated asset sales,
- conflicting resolutions, and
- prolonged litigation.
The proposed Group Insolvency Framework, now gaining traction through MCA/IBBI policy papers and international benchmarking, promises to fundamentally reshape how India handles corporate distress at a group level.
Why Group Insolvency Matters Today
1. Indian corporate structures are complex
Most conglomerates operate through holding companies, layered subsidiaries, special-purpose vehicles (SPVs), JVs, and promoter-controlled entities.
2. Financial distress is rarely isolated
When stress emerges, lenders face:
- cross defaults,
- inter-corporate loans,
- common security,
- shared management and funds.
Resolving one entity without addressing the group often leads to incomplete recovery.
3. International regimes already moved ahead
Singapore, UK, and EU frameworks allow coordinated proceedings for group entities, with mechanisms for:
- procedural consolidation,
- joint planning,
- cross-company communication, and
- integrated asset sales.
India is now catching up.
Key Features Proposed in India’s Group Insolvency Framework
1. Procedural Coordination (Not Substantive Consolidation)
India is expected to adopt a flexible framework based on coordination, not forced consolidation. This includes:
- common timelines,
- information sharing,
- joint meetings of CoCs, and
- harmonised decision-making.
2. Joint Application for CIRP of Group Companies
Creditors or companies may soon file joint insolvency applications for entities that form part of a corporate group or have demonstrable “economic linkages.”
3. Appointment of a Common RP/Liquidator
Where beneficial, NCLT may appoint:
- a common RP for multiple group entities,
- or different RPs under a “Group Co-ordinator”.
This reduces duplication, speeds up resolution, and supports integrated planning.
4. Group Co-ordination Plan
Similar to the EU model, India proposes a Group Co-ordination Plan, which allows:
- pooling of resources,
- harmonising asset sales,
- adjusting priorities where appropriate,
- resolving inter-company claims.
5. Treatment of Inter-Company Claims
One of the thorniest issues in group insolvency. Policy papers suggest:
- transparent mapping,
- priority rules to prevent double counting,
- possible “netting” mechanisms.
6. Joint Asset Sale Options
For example:
- parent company + subsidiary sold together,
- SPVs tied to a larger project sold as a block,
- integrated business line auctioned together rather than piecemeal.
This unlocks value that siloed processes destroy.
Who Benefits Most from Group Insolvency?
Banks & Financial Creditors
- Higher realisation
- Faster turnaround
- Clearer identification of promoter misuse (if any)
- Better visibility on interconnected cash flows
Resolution Applicants
- Ability to bid for integrated assets
- Clean, coordinated acquisition
- Streamlined litigation
Regulators & Government
- Reduces systemic risk
- Encourages formal restructuring
- Improves ease of doing distressed M&A
Challenges India Must Solve Before Implementation
1. Defining “Group” Entities
Corporate relationships in India are often opaque, involving:
- cross-shareholdings,
- family control,
- informal management linkages.
A flexible but robust definition is essential.
2. Balancing Entity Separateness & Synergies
IBC is entity-specific. Group insolvency must:
- protect creditors of each entity,
- while allowing value-maximising coordination.
3. Inter-company Claims Mapping
This is the biggest practical challenge — often messy and highly litigated.
4. CoC Voting Alignment
How do you coordinate voting of lenders across different entities with different exposures?
These issues will determine the success of the framework.
Expected Implementation Path (2025–26)
Based on ongoing IBBI/MCA consultations and global frameworks, the likely rollout will be phased:
1. Phase 1: Voluntary coordination for group companies
2. Phase 2: Common RP + joint planning mechanisms
3. Phase 3: Rules for cross-entity asset sales & netting
4. Phase 4: Statutory group insolvency framework under IBC amendments
5. Phase 5: Cross-border group insolvency (aligned with UNCITRAL Model Law)
India will initially avoid “substantive consolidation” (pooling assets/liabilities) except in cases of clear fraud or commingling.
The Bigger Picture: Why This Reform Is Transformational
Group Insolvency is not just a procedural reform. It is a value-creation mechanism.
- It prevents asset destruction.
- It accelerates resolution timelines.
- It uncovers promoter-level misconduct.
- It attracts strategic buyers who want “whole businesses,” not broken units.
- It aligns India with global insolvency standards.
Once implemented, Group Insolvency will bring India closer to a holistic restructuring regime — one that recognises how modern corporate structures truly operate.
Conclusion
The Group Insolvency Framework is India’s next big leap in insolvency reform. As tribunals, policymakers and lenders converge on the need for coordinated solutions, group insolvency will redefine how value is preserved in complex corporate networks.
For insolvency professionals, this is the moment to prepare — because the future of Indian restructuring will increasingly be group-level, not entity-level.
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I am Insolvency Resolution Professional handled/ handling many insolvency cases. In case of any queries related to IBC, you may contact me at Krit Narayan Mishra, kritmassociates@gmail.com | Mob: 9910859116
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