Resolution Strategies

According to Regulation 37 of CIRP Regulations, 2016, a resolution plan shall provide for the measures, as may be necessary, for insolvency resolution of the corporate debtor for maximization of value of its assets including but not limited to the following:

(a)transfer of all or part of the assets of the corporate debtor to one or more persons;

(b)sale of all or part of the assets whether subject to any security interest or not;

(ba)restructuring of the corporate debtor, by way of merger, amalgamation and demerger;

(c)the substantial acquisition of shares of the corporate debtor, or the merger or consolidation of the corporate debtor with one or more persons

(ca)cancellation or delisting of any shares of the corporate debtor, if applicable;

(d)satisfaction or modification of any security interest

(e)curing or waiving of any breach of the terms of any debt due from the corporate debtor;

(f)reduction in the amount payable to the creditors;

(g)extension of a maturity date or a change in interest rate or other terms of a debt due from the corporate debtor

(h)amendment of the constitutional documents of the corporate debtor;

(i)issuance of securities of the corporate debtor, for cash, property, securities, or in exchange for claims or interests, or other appropriate purpose;

(j)change in portfolio of goods or services produced or rendered by the corporate debtor;

(k)change in technology used by the corporate debtor; and

(l)obtaining necessary approvals from the Central and State Governments and other authorities.”

(m)sale of one or more assets of corporate debtor to one or more successful resolution applicants submitting resolution plans for such assets; and manner of dealing with remaining assets.”

Source⁠​‌​‌‌​‌​⁠: ICSI Guideline Answers, June 2025, Q. 6A(i) (Syllabus 2017).

In case of Corporate Insolvency Resolution Process (CIRP), corporate restructuring strategies include organizational restructuring and financial restructuring.

•Financial restructuring is the process of reorganizing the financial structure, which primarily comprises of equity and debt capital financial restructuring is undertaken either to recover from financial distress or as part of company’s general financial strategy, such as gaining higher market share, seize emerging market opportunities, risk reduction, better debt management.

•Debt restructuring is the process of reorganizing the whole debt capital of the company in negotiation with bankers, creditors, vendors. It involves a reduction of debt and an extension of payment terms of change in terms and conditions.

•Restructuring includes alteration of the repayment period, repayable amount, the amount of instalments, rate of interest, sanction of additional credit facility, enhancement of existing credit limits, compromise settlements etc.

•One of the best methods for corporate debt restructuring is debt-equity swap where specified shareholders have right to exchange stock for a predetermined amount of debt in the same company. In debt-equity swap, borrowings are exchanged with shares of the company.

•The resolution plan shall be submitted by a resolution applicant. The Committee of Creditors shall approve a resolution plan by a vote of not less than 66% majority of the financial creditors, after considering its feasibility and viability, and such other requirements as may be specified by the Insolvency and Bankruptcy Board of India.

•Once the resolution plan is approved by the Committee of Creditors, it is presented to the Adjudicating Authority (NCLT) for its approval.

•Thus, under the Insolvency and Bankruptcy Code, a resolution plan requires the consent of the Committee of Creditors and thereafter the approval of the Adjudicating Authority (NCLT).

•As per section 31, the NCLT shall review the resolution plan sanctioned by the Committee of Creditors. If NCLT is satisfied that the resolution plan as approved by the Committee of Creditors meets the requirements, it shall approve the resolution plan.

•After NCLT approval, the resolution plan shall be binding on the Corporate Debtor and its employees, members, creditors, guarantors and other stakeholders involved in resolution plan.

***

Source⁠​‌​‌‌​‌​⁠: ICSI Guideline Answers, December 2024, Q. 6A(iii) (Syllabus 2017).

The Insolvency and Bankruptcy Board of India (IBBI) framed IBBI (Insolvency Resolution Process for Corporate Persons) Regulations, 2016 (CIRP) to regulate insolvency resolution process. Corporate Restructuring process may be governed by the Regulation 37 of the CIRP Regulations. Measures, which the resolution plan may provide, for insolvency resolution of the corporate debtor for maximization of value of its assets including but not limited to the following:

(a)transfer of all or part of the assets of the corporate debtor to one or more persons;

(b)sale of all or part of the assets whether subject to any security interest or not;

(ba)restructuring of the corporate debtor, by way of merger, amalgamation and demerger;

(c)the substantial acquisition of shares of the corporate debtor, or the merger or consolidation of the corporate debtor with one or more persons;

(ca)cancellation or delisting of any shares of the corporate debtor, if applicable;

(d)satisfaction or modification of any security interest

(e)curing or waiving of any breach of the terms of any debt due from the corporate debtor;

(f)reduction in the amount payable to the creditors;

(g)extension of a maturity date or a change in interest rate or other terms of a debt due from the corporate debtor;

(h)amendment of the constitutional documents of the corporate debtor;

(i)issuance of securities of the corporate debtor, for cash, property, securities, or in exchange for claims or interests, or other appropriate purpose;

(j)change in portfolio of goods or services produced or rendered by the corporate debtor,

(k)change in technology used by the corporate debtor; and

(l)obtaining necessary approvals from the Central and State Governments and other authorities.

Regulation 37 of the CIRP Regulations was amended and clauses (ba), and (ca) were inserted facilitating corporate restructuring such as merger, demerger or amalgamation of the Corporate Debtor and cancellation or delisting of any shares, if applicable.

Section 5(26) of the Code defines “resolution plan” which means a plan proposed by resolution applicant for insolvency resolution of the corporate debtor as a going concern in accordance with Part II. It is provided in the Explanation to the definition that for removal of doubts, it is hereby clarified that a resolution plan may include provisions for the restructuring of the corporate debtor, including by way of merger

Therefore, a resolution plan can include corporate restructuring of the corporate debtor as part of the corporate insolvency resolution process.

Source⁠​‌​‌‌​‌​⁠: ICSI Guideline Answers, June 2024, Q. 6A(i) (Syllabus 2017).

Insolvency and Bankruptcy Code, 2016 read with Regulation 37 of CIRP Regulations provides for various measures to resolve the insolvency of the corporate debtor. These measures are detailed as follows:

i.Transfer of all or part of the assets of the corporate debtor to one or more persons.

ii.Sale of all or part of the assets whether subject to any security interest or not.

iii.Restructuring of the corporate debtor, by way of merger, amalgamation and demerger.

iv.The substantial acquisition of shares of the corporate debtor, or the merger or consolidation of the corporate debtor with one or more persons.

v.Cancellation or delisting of any shares of the corporate debtor, if applicable.

vi.Satisfaction or modification of any security interest.

vii.Curing or waiving of any breach of the terms of any debt due from the corporate debtor.

viii.Reduction in the amount payable to the creditors.

ix.Extension of a maturity date or a change in interest rate or other terms of a debt due from the corporate debtor.

x.Amendment of the constitutional documents of the corporate debtor.

xi.Issuance of securities of the corporate debtor, for cash, property, securities, or in exchange for claims or interests, or other appropriate purpose.

xii.Change in portfolio of goods or services produced or rendered by the corporate debtor Change in technology used by the corporate debtor.

xiii.Obtaining necessary approvals from the Central and State Governments and other authorities.

xiv.Sale of one or more assets of corporate debtor to one or more successful resolution applicants submitting resolution plans for such assets and manner of dealing with remaining assets.

Source⁠​‌​‌‌​‌​⁠: ICSI Guideline Answers, June 2024, Q. 5(c) (Syllabus 2022).

Regulation 37 of the IBBI (Insolvency Resolution Process for Corporate Persons) Regulations, 2016 provides that a resolution plan shall provide for the measures, as may be necessary, for insolvency resolution of the corporate debtor for maximization of value of its assets, including but not limited to the following:

(a)transfer of all or part of the assets of the corporate debtor to one or more persons;

(b)sale of all or part of the assets whether subject to any security interest or not;

(ba)restructuring of the corporate debtor, by way of merger, amalgamation and demerger;

(c)the substantial acquisition of shares of the corporate debtor, or the merger or consolidation of the

corporate debtor with one or more persons;

(ca)cancellation or delisting of any shares of the corporate debtor, if applicable;

(d)satisfaction or modification of any security interest;

(e)curing or waiving of any breach of the terms of any debt due from the corporate debtor; (f) reduction in

the amount payable to the creditors;

(g)extension of a maturity date or a change in interest rate or other terms of a debt due from the corporate

debtor;

(h)amendment of the constitutional documents of the corporate debtor;

(i)issuance of securities of the corporate debtor, for cash, property, securities, or in exchange for claims or

interests, or other appropriate purpose;

(j)change in portfolio of goods or services produced or rendered by the corporate debtor; (k) change in

technology used by the corporate debtor; and

(l)obtaining necessary approvals from the Central and State Governments and other authorities.

(m)sale of one or more assets of corporate debtor to one or more successful resolution applicants

submitting resolution plans for such assets; and manner of dealing with remaining assets.

Source⁠​‌​‌‌​‌​⁠: ICSI Guideline Answers, June 2023, Q. 4(d) (Syllabus 2017).

The Insolvency and Bankruptcy Board of India (IBBI) has made the IBBI (Insolvency Resolution Process for Corporate Persons) Regulations, 2016 (CIRP Regulations) to regulate the Insolvency Resolution Process for Corporate Persons.

Corporate Restructuring process in India under Insolvency and Bankruptcy Code, 2016 may be governed by the provisions of the Regulation 37 of CIRP Regulations; however the Code is silent on the measures of the resolution and restructuring of the corporate debtor. Regulation 37, as substituted vide Notification No. IBBI/2017-18/GN/ REGO24, dated 6th February, 2018, provides that:

"A resolution plan shall provide for the measures, as may be necessary, for insolvency resolution of the corporate debtor for maximization of value of its assets including but not limited to the following:

a.transfer of all or part of the assets of the corporate debtor to one or more persons;

b.sale of all or part of the assets whether subject to any security interest or not;

(ba)restructuring of the corporate debtor, by way of merger, amalgamation and demerger;

c.the substantial acquisition of shares of the corporate debtor, or the merger or consolidation of the corporate debtor with one or more persons

(ca)cancellation or delisting of any shares of the corporate debtor, if applicable;

d.satisfaction or modification of any security interest

e.curing or waiving of any breach of the terms of any debt due from the corporate debtor;

f.reduction in the amount payable to the creditors;

g.extension of a maturity date or a change in interest rate or other terms of a debt due from the corporate debtor

h.amendment of the constitutional documents of the corporate debtor;

i.issuance of securities of the corporate debtor, for cash, property, securities, or in exchange for claims or interests, or other appropriate purpose;

j.change in portfolio of goods or services produced or rendered by the corporate debtor;

k.change in technology used by the corporate debtor; and

l.obtaining necessary approvals from the Central and State Governments and other authorities."

Source⁠​‌​‌‌​‌​⁠: ICSI Guideline Answers, December 2021, Q. 4(d) (Syllabus 2017).