Restructuring of groups of companies could become easier if the insolvency regulator IBBI has its way.

The Insolvency and Bankruptcy Board of India (IBBI) has set up a 11-member working group under the Chairmanship of former SEBI chief UK Sinha to go into the concept of ‘Group Insolvency’ and suggest a suitable framework.

This Working Group has been tasked to submit a report — within two months — recommending a complete regulatory framework to facilitate insolvency resolution and liquidation of corporate debtors in a Group.

The idea is to have a framework that allows insolvency proceedings over companies within a corporate group to be concentrated under a single insolvency court and/or administered by one insolvency administrator, sources said.

‘Group Insolvency’ framework will help prevent corporate groups from uncontrollably falling apart in insolvency and thereby thwart the chances of their restructuring. This could be achieved through a group venue for corporate group insolvencies and by enabling co-ordination and co-operation support, sources said.

The other members of the Working Group include Anshula Kant, Managing Director, State Bank of India; Shardul Shroff. Executive Chairman, Shardul Amarchanf Mangaldas & Co; Shubhashis Gangopadhyay, Founder and Research Director, India Development Foundation; Koushik Chatterjee, Executive Director and Chief Financial Officer, Tata Steel Ltd, and Siby Antony, Chairman, Edelweiss Asset Reconstruction Company Ltd.

Saurav Kumar, Partner, IndusLaw, a law firm, said generally each company in a group should be treated as a separate legal entity and separate insolvency proceedings must be commenced for each of these companies.

He said that a ‘Group Insolvency’ process may be useful where (a) two or more applications are pending in the same court against debtors in the same Group, there could be administrative conveniences to have provisions where such debtor group or creditors of such debtor group can seek joint proceedings; (b) group of companies often enter into corporate guarantees to secure borrowings of group member or a debtor may transfer assets to group companies to defraud creditors, in specific scenarios, creditors should be able to pierce the corporate veil and bring about insolvency proceedings against all of such companies within a group.

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