Skip to content

CS Professional · Insolvency and Bankruptcy - Law and Practice · Group Insolvency

Alpha Steel Ltd, Alpha Power Ltd and Alpha Logistics Ltd are group companies of the Alpha Group. All three have defaulted to lenders, and a creditor suggests that a single combined CIRP be run for the whole group. Under the IBC as it stands in India today, what is the correct position?

Each group company goes through its own separate CIRP. The IBC has no enacted group insolvency framework, because it treats every corporate debtor as a distinct legal person. Proposals and recommendations exist, but until they are legislated a combined CIRP cannot be claimed as of right.

  1. AThe IBC contains a statutory framework for group insolvency, so one combined CIRP can be filed for all three companies as of right
  2. BEach corporate debtor undergoes its own separate CIRP, because the IBC does not yet have an enacted framework for group insolvencyCorrect
  3. COnly the holding company can be admitted to CIRP, and its subsidiaries are automatically covered
  4. DThe NCLT must always consolidate group companies once the total default crosses Rs 1 crore

Explanation

The IBC treats each corporate debtor as a separate legal entity, and no enacted provisions govern group insolvency. A framework has been recommended and discussed, but it has not been put in place by statute. Option 1 is wrong because a group CIRP cannot be demanded as of right.

Did you get it right without looking?

One question tells you little. A timed set on Group Insolvency shows your real accuracy, how long you take and where you lose marks.

Practise Group InsolvencyFree diagnostic mock

More Group Insolvency questions