Insolvency 2025

INDIA Trends and Developments Contributed by: Shardul Shroff, Misha, Aishwarya Satija and Kritika Poddar, Shardul Amarchand Mangaldas & Co

The proposed amendments The Insolvency and Bankruptcy Code (Amendment) Bill, 2025 (the “IBC Bill”) introduced in August 2025 seeks to bridge the current gap in the legal framework. The IBC Bill has proposed the introduction of a new chapter to the IBC, which aims to establish a volun - tary framework for procedural co-ordination in cases of group insolvency. The purpose of the framework is to streamline the resolution of complex corporate group structures, reduce value erosion caused by dis - jointed proceedings, and improve outcomes and value for creditors through co-ordinated decision-making. The Bill also proposes a provision that allows for the transfer of assets belonging to a personal or a corpo - rate guarantor of the corporate debtor into the CIRP of the corporate debtor. Both these reforms propose to link proceedings on the basis of a common corpo - rate structure (a group) or common contracts (such as contracts of guarantee). The underlying goal is to ensure that value is maximised through a unified approach. These frameworks are discussed in detail below. Proposed Group Insolvency Framework under the IBC Bill 2025 The IBC Bill enables the central government to make rules concerning the manner and conditions for con - ducting insolvency proceedings and liquidation pro - ceedings where such proceedings have been initiated against two or more corporate debtors that form part of a group. It proposes the adoption of a functional definition of “group”, which includes corporate debtors that are interconnected by “control” or “significant owner - ship”. This covers holding, subsidiary and associate companies as defined under the Indian Companies Act, 2013. Significant ownership is defined as the right to exer - cise 26% or more voting rights in a company. Con - trol is defined broadly to include the right to appoint a majority of the directors of the company or other key managerial personnel who are entitled to manage the affairs of the corporate person or to control the management or policy decisions. Such control can

be exercised individually or jointly with others acting in concert and may arise in several ways, including: • by virtue of their shareholding; • through contractual rights such as a shareholders’ or voting agreement, or management rights; • through provisions in a company’s constitutional documents such as the articles of association or a limited liability partnership agreement; and • through any other arrangement conferring similar influence. By adopting this expansive definition, the IBC Bill seeks to ensure that entities which are operationally and financially connected can be addressed collec - tively within the insolvency framework. The Bill also provides an indicative list of subjects on which the central government may make rules. These include the following. • Constitution of a common bench of the National Company Law Tribunal (NCLT) for group compa - nies and the transfer of pending proceedings to such bench. • Co-ordination of the proceedings of the group debtors, including co-ordination between their committees of creditors and insolvency profession - als. • Appointment and replacement of a common insolvency professional to facilitate co-ordination between the insolvency proceedings of the group debtors. • Formation of a group CoC and appointment of a group co-ordinator to facilitate communication, information sharing and alignment of proceedings. • Facilitation of co-ordination by making agreements among participating corporate debtors and their CoCs that provide measures to co-ordinate and synchronise different aspects of the group insol - vency. • Treatment of costs incurred for co-ordinating the proceedings. The central government is further empowered to suitably modify the existing provisions of the IBC to implement the framework. Before any such rules are notified, the draft rules must be laid before both

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