IBC may get a voluntary group insolvency mechanism soon
group insolvency framework under the bankruptcy law. This will facilitate a joint resolution of stressed entities of a domestic corporate group, given the interconnected nature of their operations, people aware of the development said.
The framework will be a part of Insolvency & Bankruptcy Code (IBC) amendments that the corporate affairs ministry could introduce in the winter session of Parliament, likely in December, they said. The mechanism could empower the committees of creditors of various bankrupt companies of a group to decide if they need to join hands to speed up resolution and maximise gains or pursue the processes separately, they told ET. It will apply only to a group’s bankrupt companies and won’t extend to its solvent entities, they said.
The IBC currently does not have a group insolvency mechanism. The resolution of individual entities of a group are pursued separately by their respective creditors.
A proper group insolvency framework was necessitated after the interconnected nature of group companies delayed resolution in a few cases, such as Videocon, Era Infrastructure, Lanco, Educomp, Amtek, Adel, Jaypee and Aircel.
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