Corporate Restructuring, Valuation and Insolvency · Resolution Strategies

Resolution Strategies and Restructuring Options under IBC

Updated 11 October 2026 · Fact-checked

A resolution plan is a proposal to revive a corporate debtor and maximise the value of its assets, instead of closing it down in liquidation. Regulation 37 of the CIRP Regulations lists the measures it may use: asset sale or transfer, merger, debt modification, share issue and change of management. Answer by matching each measure to the facts.

Understand Resolution Strategies and Restructuring Options

When a company defaults and the corporate insolvency resolution process (CIRP) starts, the aim is to keep the business alive if that gives creditors more than closing it. The tool for this is the resolution plan. It is a proposal by a resolution applicant that says how the debts will be dealt with and how the business will run.

Regulation 37 of the IBBI (Insolvency Resolution Process for Corporate Persons) Regulations, 2016 says a plan must provide for measures necessary for insolvency resolution for maximisation of value of assets, including but not limited to a listed set. So the list is open. A plan can use any lawful measure that serves value.

Think of the measures in four groups. First, asset-side: transfer or sale of all or part of the assets, with or without security interest, or sale of separate assets to different successful applicants. Second, structural: merger, amalgamation and demerger, substantial acquisition of shares, consolidation with other persons, and cancellation or delisting of shares. Third, debt-side: satisfaction or modification of security interest, waiver of breaches, reduction in amounts payable, longer maturity, changed interest rate or other terms. Fourth, ownership and business: amendment of constitutional documents, issue of securities for cash, property or in exchange for claims (this is how debt-equity conversion is done), change in goods, services or technology, and approvals from Central and State Governments and other authorities.

Resolution differs from liquidation. In resolution the company continues as a going concern, usually under new or changed management. In liquidation the assets are sold and the proceeds distributed, and the company is dissolved. Not every applicant can propose a plan: under section 29A, certain persons are ineligible, such as undischarged insolvents and wilful defaulters.

The same logic appears in the pre-packaged process. Under section 54L(4), if the plan approved by the committee of creditors does not change the management or control to a person who was not a promoter or in management or control, the Adjudicating Authority rejects it and passes a liquidation order.

Key rules to remember

Purpose of a resolution plan (Reg. 37): Plan = measures for insolvency resolution + maximisation of value of assets; The listed measures are 'including but not limited to', so the list is illustrative.
Asset measures: Transfer or sale of all or part of assets (with or without security interest); sale of one or more assets to one or more successful applicants, with a manner of dealing with the remaining assets; Sale to several applicants for different assets is allowed under clause (m).
Structural measures: Merger, amalgamation, demerger; substantial acquisition of shares; consolidation; cancellation or delisting of shares, if applicable; Restructuring by merger, amalgamation and demerger is a separate listed measure.
Debt and ownership measures: Modify security interest; waive breach; reduce amount payable; extend maturity or change interest; amend constitutional documents; issue securities for cash, property or in exchange for claims; Debt-equity conversion works through issue of securities in exchange for claims.
Approvals: Plan must obtain necessary approvals from Central and State Governments and other authorities; Always mention this in implementation.
Section 29A eligibility: Applicant (and persons acting jointly or in concert, and connected persons) must not fall in clauses (a) to (i); Examples: undischarged insolvent, wilful defaulter, disqualified director, SEBI-barred person.
Pre-pack rejection rule (s. 54L(4)): No change in management or control to a non-promoter, non-management person → plan rejected, pre-pack terminated, liquidation order; Pre-pack costs are included in liquidation costs.

How to solve Resolution Strategies and Restructuring Options questions

Use this method for any question on strategies a plan may adopt. Tie each strategy to a fact in the case.

1Read the facts and note the debtor's problem: unsustainable debt, idle assets, weak management, or a viable core business.
2State the principle: a resolution plan must provide measures for resolution and maximisation of value of assets (Regulation 37).
3Pick the strategies that fit: asset sale, merger or demerger, debt modification, issue of securities, change of business or technology.
4Explain each chosen strategy in one or two lines, quoting the wording of Regulation 37.
5Check the applicant's eligibility under section 29A, including connected persons.
6Add implementation points: government and other approvals, and the plan's provisions for effective implementation.
7Conclude by comparing with liquidation: resolution keeps the going concern and aims at higher value.

Quickest way: Four-bucket recall

When to use it: Use when you must list strategies fast in a short answer.

Write four headings: Assets, Structure, Debt, Ownership and business.
Under each, put two or three listed measures from Regulation 37.
Add one line: list is illustrative, not exhaustive.
Add approvals and section 29A eligibility as the closing line.

Common mistakes in Resolution Strategies and Restructuring Options

Treating the Regulation 37 list as closed.
Students memorise the items and forget the words 'including but not limited to'.
Fix: Say the list is illustrative and any lawful measure maximising value can be used.
Confusing resolution with liquidation.
Both follow default, so they look alike.
Fix: State that resolution revives the going concern, while liquidation sells assets and dissolves the company.
Calling debt-equity conversion a separate listed item.
Textbooks use the term, but the regulation does not.
Fix: Link it to issue of securities in exchange for claims or interests, and to reduction or modification of debt.
Ignoring section 29A.
Students focus only on strategy.
Fix: Always check whether the applicant or connected persons are ineligible.
Forgetting the approvals step.
It is the last clause and seems minor.
Fix: Mention approvals from Central and State Governments and other authorities in every implementation answer.
Stating the pre-pack rejection rule too broadly.
Students recall only 'no change of management means liquidation'.
Fix: Add the condition: it applies where the Adjudicating Authority has passed an order under section 54J(2) and the plan does not change management or control to a person who was not a promoter or in management or control.

Worked examples

Example 1

Sunrise Textiles Ltd, a corporate debtor, has a profitable spinning unit and a loss-making weaving unit with heavy secured debt. A resolution applicant proposes to keep the spinning unit, sell the weaving unit's assets, convert part of the debt into shares and extend the maturity of the rest. Identify the strategies used and comment on their validity.

Show the solution

Sale of weaving unit assets: Regulation 37 allows transfer or sale of all or part of the assets, whether or not subject to security interest.
Conversion of debt into shares: this is issue of securities of the corporate debtor in exchange for claims or interests.
Extension of maturity of the remaining debt: the regulation allows extension of a maturity date or change in interest rate or other terms.
Keeping the spinning unit: the plan restructures the business around a viable core, which serves maximisation of value.
Validity: all measures fall within the listed measures, and the list is not exhaustive.
Conditions: the applicant must be eligible under section 29A, and necessary government and other approvals must be obtained.

Answer: The plan uses asset sale, issue of securities in exchange for claims, and extension of maturity. All are permitted by Regulation 37, subject to section 29A eligibility and necessary approvals.

Example 2

Distinguish a resolution plan involving a merger from liquidation for Alpha Steels Ltd, and state which measures Regulation 37 gives for a merger-based plan.

Show the solution

Resolution: the company continues as a going concern. A merger-based plan restructures it by merger, amalgamation or demerger.
Related measures: substantial acquisition of shares, merger or consolidation with one or more persons, and cancellation or delisting of shares, if applicable.
Supporting steps: amend constitutional documents and issue securities to the merged entity or creditors.
Liquidation: assets are sold and proceeds distributed, and the company does not continue.
Compliance: the applicant must satisfy section 29A, and necessary approvals must be obtained.

Answer: A merger-based plan keeps the business alive through restructuring under Regulation 37, while liquidation ends it by sale of assets. The merger plan needs section 29A eligibility and approvals.

Exam tips

Quote the phrase 'maximization of value of its assets' early in every answer.
Group the measures into assets, structure, debt and ownership. Examiners reward clear structure.
Link every strategy to a fact in the case, then conclude.
Mention section 29A when the facts describe a promoter, wilful defaulter or related party applicant.
For pre-pack questions, quote the section 54L(4) rejection condition exactly.

Practice questions from Resolution Strategies

Resolution Strategies and Restructuring Options: frequently asked questions

What can a resolution plan include under the IBC?

Regulation 37 lists asset transfer or sale, merger, amalgamation and demerger, share acquisition, modification of security interest, debt reduction or extension, amendment of constitutional documents, issue of securities and approvals. The list is not exhaustive.

Is debt-equity conversion allowed in a resolution plan?

Yes. A plan can issue securities of the corporate debtor in exchange for claims or interests. It can also reduce or modify the amount payable to creditors.

How is a resolution plan different from liquidation?

A resolution plan aims to revive the corporate debtor and maximise value of its assets as a going concern. Liquidation sells the assets, distributes the proceeds and ends the company.

Who cannot submit a resolution plan?

Section 29A bars persons such as undischarged insolvents, wilful defaulters, persons disqualified as directors and persons prohibited by SEBI. It also covers persons acting jointly or in concert and certain connected persons.