The Relationship Between Mergers And Acquisitions And The Insolvency And Bankruptcy Code (IBC) In India: A Critical Analysis
Arjun Khanna, Amity Law School, Noida
ABSTRACT
The present study undertakes a critical analysis of the correlation between mergers and acquisitions (M&A) and the Insolvency and Bankruptcy Code (IBC) in the Indian context. The enactment of the IBC in 2016 has brought about significant reforms to India's insolvency framework, providing an efficient mechanism for resolving distressed assets and reviving financially distressed companies. This has been particularly relevant in light of the recent surge in M&A activities, which has been driven by market consolidation, globalisation, and strategic synergies.
This study examines the effects of the IBC on M&A deals, emphasising the difficulties and advantages that it offers prospective purchasers. The implementation of the moratorium period in accordance with the Insolvency and Bankruptcy Code (IBC) has the potential to exert a substantial influence on ongoing merger and acquisition (M&A) discussions by halting legal proceedings during the resolution process. The IBC also places emphasis on the acquisition and resolution processes of distressed assets, thereby presenting prospects for acquirers to partake in the resolution process and capitalise on undervalued opportunities.
The Insolvency and Bankruptcy Code (IBC) offers distinctive opportunities for acquirers through the provision of flexibility in structuring resolution plans and exemption from delisting regulations. Despite this, acquirers are required to navigate a multifaceted resolution process, tackle regulatory ambiguities, and surmount operational and financial challenges that are linked to the acquisition of distressed assets. The aforementioned statement pertains to the legal aspects that are taken into account during mergers and acquisitions (M&A) transactions by the Insolvency and Bankruptcy Code (IBC). The paper delves into a comprehensive analysis of crucial elements, including but not limited to the exercise of reasonable care and attention, identification of financially troubled entities, development of strategies to resolve issues, acquisition of endorsement from the Committee of Creditors (COC), adherence to regulatory requirements, an amalgamation of operations, the establishment of mechanisms to resolve disputes, and compliance with post-acquisition regulations.
Moreover, it underscores the significant modifications that have been incorporated into the International Building Code (IBC) to cater to the changing demands and complexities. The aforementioned modifications comprise the integration of home buyers within the category of financial creditors, the prohibition of promoters from participating in the acquisition of distressed assets, an explication regarding the process of addressing the Competition Commission of India (CCI), revisions to the Takeover Code, exceptions from delisting, and the mandate for obtaining CCI's approval. This study concludes that the Insolvency and Bankruptcy Code (IBC) and its subsequent amendments play a significant role in enhancing the efficiency of the insolvency framework concerning mergers and acquisitions (M&A) in India. Achieving favourable results in mergers and acquisitions (M&A) within the framework of the Insolvency and Bankruptcy Code (IBC) necessitates a thorough grasp of the intricacies involved, efficient measures to mitigate risks, and the capacity to enhance the worth of troubled assets.
