Legal Advisory & Support Services: Trusted Insolvency Legal Advice in India

In today’s fast-moving and competitive business environment, Indian companies face increasing financial pressure due to delayed payments, aggressive lending, and unpredictable regulatory changes. When such challenges arise, seeking timely and expert insolvency legal advice is not just helpful—it is essential.

At LawCrust Legal Consulting, we help businesses navigate financial distress through structured legal and financial strategies—whether it involves pre-insolvency advice, loan restructuring, or full-scale engagement with India’s Insolvency and Bankruptcy Code (IBC), 2016.

Understanding Insolvency Legal Advice in India

Insolvency means a business cannot meet its financial obligations on time. The IBC, introduced in 2016, transformed how India deals with failing businesses. It offers a unified, time-bound resolution process, prioritising creditors’ rights while aiming to revive struggling companies.

Before the IBC, different laws governed debt defaults, causing delays and confusion. The IBC replaced this with a single, structured framework for corporate insolvency, bankruptcy consulting, and liquidation.

1. Why Do Indian Businesses Face Insolvency?

Financial trouble in Indian businesses is often the result of:

• Economic shocks (e.g., global recessions or pandemic disruptions)
• Weak corporate governance in distress situations
• Sector-specific downturns (like in infrastructure or real estate)
• Operational inefficiencies
• Delayed payments from large clients or government departments
• Poor debt planning or overly ambitious expansions

These are everyday realities for MSMEs and even large enterprises in India.

2. Actionable Steps: Avoiding and Managing Insolvency

With early intervention and the right legal strategy, businesses can prevent insolvency or manage it better. Here are the most effective approaches:

• Pre-Insolvency Advice

Track your company’s financial health regularly. If red flags appear—like cash flow issues or missed payments—seek legal and financial guidance. This early-stage consultation can uncover options like internal restructuring or operational improvements.

• Loan Restructuring

The Reserve Bank of India (RBI) has laid down restructuring frameworks—especially during crises like COVID-19. Businesses can renegotiate repayment terms or request a moratorium. Effective loan restructuring helps avoid default and formal insolvency proceedings.

• Refinancing Options

For businesses with viable operations but temporary liquidity issues, refinancing options can be explored. Lower interest loans or fresh capital can reduce pressure and keep operations running.

• Corporate Governance in Distress

Sound decision-making starts with transparency and accountability. Forming an independent board, regular disclosures, and strong internal checks help prevent crisis escalation.

A recent NCLAT ruling (June 16, 2025) clarified that NCLT can initiate investigations under the Companies Act in IBC cases, provided due process is followed. This emphasizes the need for strong governance even during insolvency.

• Asset Sale Strategies

When parts of a business are non-core or underperforming, strategic asset sale strategies can free up cash, reduce debt, and focus operations. This must be done carefully to ensure value maximisation.

• Distressed Investment Opportunities

Buyers can acquire assets under IBC processes at lower valuations. However, compliance with Section 29A is crucial to avoid future litigation. LawCrust provides guidance for both sellers and distressed asset acquisition investors.

3. Navigating IBC: Legal Framework and Process

When early remedies fail, the IBC steps in with a structured Corporate Insolvency Resolution Process (CIRP):

Key Steps under the IBC:

• Filing Before NCLT: A defaulting company, lender, or supplier can initiate CIRP by filing before the National Company Law Tribunal.
• Moratorium: Once admitted, all legal actions against the debtor pause.
• Interim Resolution Professional (IRP) takes over and runs the company’s affairs.
• Committee of Creditors (CoC) is formed, made up of financial creditors, which evaluates and votes on resolution plans.
• Resolution Plan: Applicants propose plans, often involving debt restructuring, business transfer, or fresh investments.
• NCLT Approval: Final approval comes from the tribunal.

Recent reform: As of May 26, 2025, IBBI guidelines now ensure transparent, fair appointments of resolution professionals. This protects stakeholders from conflicts of interest and mismanagement.

4.. Real-World Judgment Insights

• JSW Steel vs. Bhushan Power & Steel (2025)

The Supreme Court raised concerns over completed resolution plans, questioning JSW Steel’s acquisition due to prior fraud concerns. The outcome created uncertainty, highlighting the need for robust legal opinions and watertight due diligence.

• Vistara ITCL v. Torrent Investments (2023)

The NCLAT reaffirmed that resolution applicants must not delay and must meet strict timelines. It reminded all parties to prioritise the IBC’s time-bound nature.

Post-Insolvency Support & Recovery

Once a resolution plan is approved or liquidation ordered, businesses need Customised post-insolvency support:

• Execution of Resolution Plans
• Regulatory Compliance (IBBI, MCA, SEBI filings)
• Ongoing Stakeholder Guidance
• Distressed Investment Structuring
• Asset Monetisation Support

Our team works with investors, asset reconstruction companies (ARCs), and debt funds to ensure a smooth transition and value preservation.

What’s Next for Indian Insolvency Law?

The IBC is evolving to reflect India’s growing economic complexity. Key emerging trends include:

• Pre-Packaged Insolvency for MSMEs: Fast-track resolution with limited NCLT involvement.
• Cross-Border Insolvency Reforms: India may adopt UNCITRAL Model Law for better handling of international debt cases.
• Tech-Driven Resolution: E-filings, AI-based claim management, and virtual hearings.
• Greater Promoter Scrutiny: Section 29A bars promoters from reclaiming assets, signaling a shift toward accountability.

Partner With LawCrust — Where Legal Meets Growth

LawCrust Legal Consulting, a subsidiary of LawCrust Global Consulting Ltd., provides premium Legal services, ranked among the top 10 legal consulting firms in India, and offers business-focused legal solutions that go beyond compliance. As a Top corporate law firm service provider in India, we specialise in contracts, company law, M&A, Fundraising Solutions, Startup Solutions, Insolvency & Bankruptcy, Debt Restructuring, Hybrid Consulting Solutions, IBC matters, data protection, intellectual property (IP), and cross-border structuring for NRIs. Our fixed-cost legal plans and virtual access make legal support simple, strategic, and scalable.

Need reliable legal backing for your business? Partner with LawCrust — where legal meets growth.

Contact LawCrust Today!

• Call Now: +91 8097842911
• Email: inquiry@lawcrust.com