Reconfiguring The Group Insolvency Framework Under IBC In Light Of IBC (Amendment Bill) 2025: What Guidelines Under Section 59A Should Address, Challenges And Way Forward
- IJLLR Journal
- Mar 16
- 2 min read
Tejbeer Singh, National Law Institute University, Bhopal
Ananya Jain, National Law Institute University, Bhopal
The proposed section 59A and Chapter IVA in the IBC (Amendment bill), 2025 provides for a group insolvency framework under the Indian Insolvency regime. Clause (2) of Section 59A provides that the Central government is empowered to give guidelines for the group insolvency framework. Explanation (a) defines control in a broad manner, including the right to appoint majority of directors or control management or appointment/control of key managerial personnel or to manage affairs or control decisions in any manner. Explanation (b) further provides that ‘group’ means two or more companies interconnected by ‘control’ or ‘significant beneficial ownership’. This clearly implies that due to this broad definition, the third companies that might not be a debtor themselves but are connected to the corporate debtor, are open to insolvency applications under section 7 and section 9 of the code. In light of the proposed bill, the article will first explore the need for a group insolvency framework, the factors essential for determining whether a company forms a part of the group for consolidation. Further piece will also highlight issues that might arise for the operational creditors in the group insolvency framework and how their claims need to be safeguarded, lastly the piece will try to suggest some procedural safeguards that need to be incorporated by the Central government under S. 59A(2) of the bill, to make sure that the framework is robust and is not abused to defeat the objectives of the insolvency framework.
The Need for a Group Insolvency Framework.
Corporate insolvency law in India has historically been structured around the resolution of individual corporate debtors, with CIRPs operating on an entity-by-entity basis, which increasingly fails to reflect the way contemporary business operates. Modern enterprises often operate through corporate groups, with different companies performing distinct but interdependent functions. Operational and financial connections between the companies, such as shared assets and inter-corporate guarantees, often mean that group companies function as single economic entity. In such cases, treating each company of the group as a single debtor during the process of insolvency resolution may lead to value destructive outcomes, and fragmentation of business operations, thereby undermining the core objectives of the Insolvency and Bankruptcy Code, 2016 which emphasises value maximisation and recovery.
