Group insolvencies to get legal blessing

Healthier group companies may be kept out of rescue process

- Gireesh Chandra Prasad

Clarity is on the cards for conglomerates heading for bankruptcy, with the government working on a new legal regime to decide how and which group companies should be selected for the rescue act.

Central ministries are discussing a bill that will amend the Insolvency and Bankruptcy Code (IBC) to expand the resolution rules from individual entities to groups of enterprises, a person aware of the matter said.

Group insolvency is not absolutely new under IBC, the person said. “There are a few instances of group insolvency process undertaken by tribunals under existing IBC provisions. However, the proposed amendments to IBC will bring clarity and an overarching regime for the benefit of stakeholders including creditors, investors, resolution professionals and the judiciary," the person said on condition of anonymity.

In the case of Videocon Industries Ltd, the company law court had ordered the resolution of over a dozen group companies under IBC’s existing provisions.