Response to IBBI Working Group on Group Insolvency

Anjali Sharma, Bhargavi Zaveri

In April 2019, FRG submitted its response to the IBBI Working Group on Group Insolvency. The response evaluates the need for a legislative framework for insolvency of debtor firms that belong to a "group". It highlights the fact that:

  • creditors to firms in business groups can use contractual safeguards to protect their interests, and
  • the IBC already has provisions to deal with fraudulent and malfeasant actions of debtors.
Given this, a framework for substantive consolidation of insolvency proceedings of debtor firms in a business group may be undesirable and may adversely impact credit markets. The response also notes that, if at all, there may be a case for developing a guiding framework for procedural consolidation that is based on creditors' consent.