When a company faces financial instability, one critical question arises: who maintains control during the restructuring process? India’s newly implemented Creditor-Initiated Insolvency Resolution Process (CIIRP), as outlined in Chapter IV-A of the Insolvency and Bankruptcy Code, 2016 (IBC), addresses this query with a distinctive approach. Under this system, creditors initiate proceedings, yet the company’s management retains control under the supervision of a resolution professional (RP). This hybrid model positions itself between two existing regimes in India: the Corporate Insolvency Resolution Process (CIRP), where creditors assume control, and the Pre-Packaged Insolvency Resolution Process, which allows debtor control but is restricted to micro, small, and medium enterprises.
Similarly, Singapore’s scheme of arrangement provides a court-supervised compromise between a corporation and its creditors. Here, management remains in control, creditors vote on a proposed compromise, and the court ensures procedural integrity rather than evaluating the commercial terms of the restructuring. This debtor-in-possession model closely aligns with India’s CIIRP.
India’s CIIRP: A Blend of Creditor-Initiated, Debtor-Controlled Processes
The CIIRP allows debtors to maintain control after creditors, representing a majority of a notified class, approve the initiation based on their debt amount. Once notified, the debtor has 30 days to respond, and any representation requires creditors to reconfirm their approval. This collaborative approach is likely pre-arranged between creditors and management to ensure a smooth process.
Upon obtaining a second round of approvals, an RP is appointed, and the debtor’s management continues to operate under oversight. Unlike the CIRP, the CIIRP does not automatically impose a moratorium on creditor enforcement upon admission. Instead, the RP can apply for a moratorium with 51% creditor approval, activating it immediately upon application filing, and pending National Company Law Tribunal (NCLT) review.
The committee of creditors (CoC) is then formed, tasked with negotiating a resolution plan within 150 days, extendable by 45 days with 66% CoC and NCLT approval. The RP must provide an information memorandum, ensuring transparency and accountability from the debtor’s management, who face liability for any misinformation.
If CIIRP fails, it may convert into a CIRP, either through a 66% CoC vote or NCLT order if no resolution plan is agreed upon, or if the debtor fails to cooperate with the RP. The NCLT’s role is limited to confirming procedural compliance, not the commercial soundness of the restructuring.
Singapore’s Scheme of Arrangement: Court-Supervised Compromise
In Singapore, a scheme of arrangement begins with a company’s court application to convene a creditors’ meeting. Governed by Part 5 of the Insolvency, Restructuring and Dissolution Act 2018 (IRDA), the management remains in control throughout. A moratorium can be applied for, with an interim 30-day automatic moratorium provided upon application filing.
As seen in Re IM Skaugen SE, the Singapore High Court assesses the prospect of a successful compromise and creditor support to extend a moratorium. Recent cases such as Re Energe Asia Pte Ltd illustrate the importance of good faith and independent creditor backing.
The Singapore Court of Appeal requires full disclosure from applicants at the leave stage to ensure informed creditor voting, as reinforced in Pathfinder. Creditors must be grouped into classes based on similar rights, with approval requiring a majority in number and three-fourths in value of voting creditors. Section 70 of the IRDA allows for a cross-class cram-down with appropriate court satisfaction.
The Singapore court ensures statutory compliance and fair representation but does not impose its commercial judgment. Once sanctioned, the scheme binds all creditors, including dissenters.
Conclusion
The effectiveness of India’s CIIRP as an early intervention tool will depend on informed creditor consent, earned moratoriums, and NCLT’s scrutiny. Singapore’s established framework provides valuable insights, having navigated cross-border restructurings with debtor control and creditor engagement.
Authors: Smitha Menon, Partner and Head of Restructuring & Insolvency Practice at WongPartnership, and Kajal Bhatia, Associate at the Firm. Bahram N. Vakil and Nilang Desai, Co-founder and Senior Partner at AZB & Partners, respectively.
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