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

Three companies of the Sundaram Group, Sundaram Steels Ltd, Sundaram Logistics Ltd and Sundaram Power Ltd, have given cross-guarantees to each other's lenders and share a common treasury. All three default and separate CIRPs are admitted before the same Bench. Which feature of this fact pattern best explains the need for a group insolvency approach?

The need arises because the group companies are financially interlinked through cross-guarantees and a common treasury. Resolving them in separate processes can lead to inconsistent decisions and reduced value, whereas coordinated handling preserves value and treats creditors more consistently across the group.

  1. AThe companies have the same registered office city
  2. BTheir financial affairs are so interlinked that separate processes may produce inconsistent and value-destroying outcomesCorrect
  3. CEach company has a different financial year
  4. DThe companies are listed on different stock exchanges

Explanation

Group insolvency addresses situations where entities are financially and operationally intertwined through guarantees and shared treasury. Handling them separately can cause conflicting decisions and loss of value. Location, financial year or listing venue do not create such interdependence.

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