CS Professional · Insolvency and Bankruptcy - Law and Practice · Group Insolvency
Four companies of the Sarthak Group in India are all admitted into separate CIRPs. Each has a different resolution professional, and creditors of the group have intercompany guarantees and shared assets. The main reason the Insolvency Law Committee suggested a group insolvency framework is to:
The group insolvency framework seeks to coordinate the insolvency processes of related group companies so that interlinked issues like guarantees, shared assets and intercompany debts are handled together, reducing cost and delay and maximising value, rather than benefiting promoters or merging share capital.
- AAllow the promoters to retain control of all group companies
- BCoordinate the insolvency processes of related group entities to improve efficiency and value maximisationCorrect
- CMerge all the group companies' share capital into a single entity automatically
- DExempt group companies from the moratorium provisions
Explanation
Group insolvency aims at coordinating the processes of interconnected entities, so that common issues such as guarantees, shared assets and intercompany debts are handled consistently, cutting cost and delay and improving value. It does not hand control to promoters or merge share capital, and moratorium is not removed.
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