Skip to content

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

Gamma Ltd and its subsidiary Gamma Components Ltd are both in CIRP. Gamma's Committee of Creditors wants to pool the two estates and distribute the proceeds as though they were one company. In the absence of a statutory group insolvency framework, the correct view is that:

The estates cannot simply be pooled. The IBC has no express provision for substantive consolidation, and each corporate debtor remains a separate legal person with its own CIRP and creditors. Common ownership does not merge them, and neither the IP nor the Registrar can order consolidation.

  1. APooling is automatic because the companies share a common parent
  2. BThe IP of Gamma can unilaterally decide on pooling
  3. CSubstantive consolidation has no express statutory basis in the IBC, so the creditors cannot simply pool the estates, and any resolution plan must treat each corporate debtor's creditors according to its own estateCorrect
  4. DThe Registrar of Companies can order consolidation of the two estates

Explanation

The IBC has no express provision for pooling estates, and each corporate debtor's CIRP is conducted separately, with creditors dealt with from that debtor's assets under its own plan. Neither the IP nor the Registrar has the power to order consolidation. Option 1 is wrong because common ownership alone does not merge two legal entities.

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