India’s transformation from a fragmented and cumbersome insolvency regime to a modern framework that has gained international recognition is remarkable. At the heart of this evolution lies the Insolvency and Bankruptcy Code (IBC), introduced in 2016 – a reform that shifted control from defaulting promoters to financial creditors and set a new benchmark for transparency and speed in corporate restructuring.
In this interview, Cecilia Brinck, Managing Partner at Nordic Interim SE – A Valtus Company in Sweden, speaks with Sanjay Lakhotia, CEO and co-founder of Noble House Consulting Pte. in India. As members of the Valtus Alliance, a global network of Executive Interim Management firms, we explore how India’s unique legal environment has reshaped the restructuring landscape, what lessons international companies can learn, and how Interim Executives are becoming vital to effective crisis response in one of the world’s fastest-growing economies.
Sanjay, what makes the legal framework for insolvency and restructuring unique in your country?
India’s turnaround came in 2016 with the introduction of the Insolvency and Bankruptcy Code (IBC), a landmark reform that unified fragmented laws into a single, time-bound process. What makes it truly unique is its creditor-in-control model, where the decision-making power lies with financial creditors, not the defaulting promoters. This shift brought in unprecedented discipline, accountability, and transparency. Today, India’s framework is recognised globally, and it’s been studied and referenced by other emerging markets. Of course, like any ambitious system, it’s still maturing. But the direction is clear, and the progress in just under a decade has been remarkable.
Are there mandatory reports or expert opinions required in the event of a liquidity crisis or imminent insolvency?
Once IBC kicks in, yes, and the process is tight. Once a company is admitted into insolvency, an Interim Resolution Professional (IRP) is appointed and tasked with preparing detailed reports on the company’s finances, operations, and liabilities. These form the basis for decisions by the Committee of Creditors (CoC). India also mandates registered valuers and independent audit assessments during the process, ensuring rigour and transparency. What’s impressive is how a formal structure now exists where previously there was opacity and fragmentation. We’ve moved from ambiguity to a rule-bound, evidence-based resolution approach, and that’s a big leap.
In your experience, what is the most common mistake companies make in the early stages of a liquidity crisis?
Denial. Almost always. The first instinct is to protect reputation – delay tough conversations with lenders, hope the next funding round or order cycle will save the day. I’ve seen companies burn critical months that way. By the time they reach out, the options are fewer, and the lenders are less trusting. Another mistake is trying to fix everything internally. In-house teams, while well-meaning, are often too close to the problem. You need fresh eyes, someone who can separate emotion from execution. But that’s changing. With IBC in place and greater awareness about early resolution tools, many promoters today are more proactive. The real opportunity lies in normalising restructuring as a strategic reset, not a failure. And that mindset shift is already underway.
At what point, and in what role (e.g., consultant, CFO, CRO), should an external restructuring expert be brought in – and who should mandate them (management, board, owners, banks, government)?
Ideally, at the first signs of sustained stress, not after default. Bringing in an external expert as a Chief Restructuring Officer (CRO), or even a sector-specialist advisor, allows companies to act decisively and preserve value. In India, this is usually mandated by the board or promoters themselves. Increasingly, we’re also seeing investors and creditors recommend professionals from trusted panels. The ecosystem is growing, we now have credible interim leaders, specialist funds, and advisory firms who bring both objectivity and speed. The earlier they come in, the smoother the recovery journey.
Are there any protective shields in your country?
India doesn’t use the term “protective shield,” but we have a conceptually similar framework in the form of Pre-Packaged Insolvency (PPIRP) – designed for fast, consensual resolutions, especially for MSMEs. It offers a moratorium, protects the business, and allows promoters to propose a plan with creditor oversight. There’s also Section 230 of the Companies Act, which allows for court-approved schemes of compromise and arrangement. While not used as widely as in Europe, these tools reflect India’s intent to promote restructuring over liquidation. The trend is clear: preserve viable businesses, not just recover dues.
Do employees in your country continue to receive their salaries and bonuses in the event of insolvency, or do they lose the entire or part of their wages?
Salaries during insolvency become part of what we call Insolvency Resolution Process Costs (IRPC), which get top priority. India’s IBC has clear protections in place, but only for services rendered during the process. So yes, employees are protected during the process, but arrears before CIRP are at risk. While pre-insolvency dues fall under operational debt, we’ve seen resolution applicants increasingly factor in employee retention as a critical success factor. That’s a cultural shift, recognising that people, not just assets, are central to a successful turnaround.
In cases of insolvency or bankruptcy, how do Interim Managers working in restructuring ensure they receive their remuneration?
Good question. If an Interim Manager is appointed as a Resolution Professional, their fees are part of the IRPC and must be approved by the CoC – ensuring top-priority status. If they’re engaged informally, say pre-IBC, then it’s subject to contract. I always recommend a fee structure that includes some upfront component and performance-linked incentives. Clarity on this, before stepping in, is non-negotiable. Also, escrow-backed engagements have become more common in high-risk cases. India’s system, in that sense, respects the value of professional intervention.
In the event of a severe profitability and liquidity crisis, what would you consider the best course of action for a foreign corporation with a local subsidiary in your country?
Start with a hard, honest diagnosis. Is the issue India-specific, or part of a global strategic misalignment? Then, act quickly. If the subsidiary still has value – IP, supply chain, brand, bring in local advisors who understand both the Indian compliance system and the cultural nuances. Too often, foreign parent companies delay decisions because they’re unfamiliar with Indian insolvency laws or fear reputational damage. But India now has clear legal pathways – IBC, asset sale frameworks, even cross-border insolvency under development. The key is this: don’t wait until the court drags you in. Voluntary restructuring, even if painful, almost always leads to better outcomes than reactive liquidation.
How established is private equity in India regarding restructuring?
It’s growing, especially in the last 5 years. Funds like Edelweiss ARC, Piramal, and Oaktree have entered distressed asset markets aggressively. We also see family offices getting into special situations, especially where there’s potential for turnaround with operational fixes. But it’s still not mainstream. In most large restructurings, public sector banks dominate the CoC, and their risk appetite is low. That said, I believe the future of PE-led restructuring in India is strong, especially in consumer and infra where brand or asset quality is still high, but management needs a reset.
Does your government support companies in crisis – for example, through specific subsidies or state-backed loans?
Yes, and increasingly so. During COVID, for instance, India introduced the Emergency Credit Line Guarantee Scheme (ECLGS) – over three trillion rupies (≈ $36.14 billion USD) disbursed to MSMEs. There are also schemes like TUFS in textiles and PLI in manufacturing that can help viable companies reinvest and grow. But when it comes to true restructuring – distressed financing, wage support during insolvency, etc., the ecosystem is still evolving. The government has backed the creation of NARCL (India’s bad bank) to clean up NPAs but operationalising it at scale will take time. We’re not there yet, but I’m hopeful.