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According to two people familiar with the matter, the new framework is designed to make the process more efficient, cut costs, and improve the overall value for creditors. The proposed group insolvency rules aim to streamline the complex and often lengthy process of untangling distressed corporate empires.
“The rules will be designed to keep the cost of debt resolution of the entities minimum, avoid duplication, preserve the synergy among the entities and improve the overall value realization of the enterprises,” one of the two people said on the condition of anonymity. The rules will be issued once the IBC (Amendment) Bill 2025 is cleared by the Parliament.
Pressing need
The new framework addresses the long-standing need for a system to rescue companies linked by common ownership or control, a topic that has been frequently discussed since the IBC’s debut in 2016.
Distressed group companies will have to sign a coordination agreement, which will be binding on them and their creditors, the people cited above said. The National Company Law Tribunal (NCLT) will be empowered to enforce the agreement. Such an agreement will set the protocols for information sharing, joint negotiations, claim management and restructure of multiple entities as one economic unit, without affecting their status as separate legal entities.
Under IBC, a committee of creditors (CoC) is formed for every company undergoing bankruptcy resolution. The new rules will propose forming a new panel comprising members from the CoCs of insolvent group companies. This apex committee will oversee the debt resolution plan, the people cited above explained.
Queries emailed to the ministry of corporate affairs and to IBBI on Friday seeking comments remained unanswered.
Preserving synergy
“The rules will be designed to keep the cost of debt resolution of the entities minimum, avoid duplication, preserve the synergy among the entities and improve the overall value realization of the enterprises,” the first person cited above said.
Consolidating the bankruptcy resolution of Videocon Industries Ltd and its 12 associate enterprises was one of the first attempts for a group debt resolution in India under IBC, but the process that started in 2019 winds on. An earlier consolidated plan, which would have led to 95% haircuts to creditors, was challenged by some of the creditors. A subsequent attempt met with resistance from the promoter and the successful bidder. The resolution professional appointed is still running the affairs of the Videocon group companies.
Unlike Videocon, some of the other prominent business groups have gone into individual bankruptcy proceedings.
These entities include Essar Group companies Essar Steel Ltd and Essar Power MP Ltd; Reliance ADA Group entities Reliance Communications Ltd, Reliance Infratel Ltd, and Reliance Telecom Ltd; and Jaypee Group entities Jaypee Infratech Ltd and Jaiprakash Associates Ltd, according to information available from bankruptcy rule maker, Insolvency and Bankruptcy Board of India.
Procedural coordination
Experts said that coordinating procedures is crucial in group bankruptcy resolution.
“It would be interesting to see what would be provided in the rules which are to be notified by the central government relating to group insolvency. In most of the foreign jurisdictions having advanced insolvency regimes, the larger focus to address a group insolvency scenario starts with procedural coordination as indicated in the proposed IBC (Amendment) Bill, 2025,” said Surendra Raj Gang, partner, deals, debt and special situations atGrant Thornton Bharat LLP.
The proposed amendments in the Bill intend to preserve and maximize the value of assets of group entities, explained Anoop Rawat, national practice head (insolvency and Restructuring) at law firm Shardul Amarchand Mangaldas & Co.
Common authority
“So far, adjudicating authorities have provided judicial recognition to group insolvency proceedings. However, different benches have adopted different methodologies for consolidated group insolvency processes. The proposed amendments have laid down broad principles of undertaking group insolvency proceedings including common adjudicating authority to avoid multiplicity and divergence of views and achieving process efficiency through common insolvency professional,” said Rawat.
“It is interesting to note that the focus is more on procedural efficiencies without expressly prescribing commingling of assets and liabilities. We shall wait to see how rules deal with the complexities,” said Rawat.
Surendra Raj Gang ofGrant Thornton Bharat said lenders (financial creditors) would be required to analyze group structures well and would be required to coordinate better with committee of creditors of other group entities for smooth resolution.
“In such complex situations, it would be expected that decision-making from the creditors’ committee is also quick,” he said.
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