Out-of-Court Restructuring in India: Preserving Businesses Through Practical Solutions

When a business begins to show signs of financial stress, many assume that insolvency proceedings become unavoidable. In practice, that is often not the case. Particularly in asset intensive sectors such as shipping, ports, logistics, infrastructure and energy, the financial and commercial fundamentals remain sound even when liquidity is strained. What the business may truly need is a structured and confidential framework to regain stability and protect long-term value.

With experience advising distressed companies, financial institutions and investors, I have seen that a well designed and consensual out-of-court restructuring can achieve this balance. It allows financial concerns to be addressed before they escalate into enforcement or formal insolvency.

What Out-of-Court Restructuring Means in Practice

Out-of-court restructuring involves a negotiated resolution between a company and its key creditors. This takes place without commencing statutory insolvency proceedings under the Insolvency and Bankruptcy Code (IBC) and without immediate enforcement of security or recovery actions.

The aim is clear. Stabilise the capital structure while the business continues to operate normally. This preserves the commercial engine that generates value for all stakeholders.

Why It Is an Effective Option

A company responding to liquidity pressure must focus on three key elements:

Operational continuity
Reputation and stakeholder confidence
Enterprise value preservation

Because out-of-court restructuring is confidential, tailored to the circumstance and comparatively efficient in implementation, it often results in better recovery outcomes for creditors while giving viable businesses time to recover.

Tools That Form the Solution

Every restructuring plan is different. Depending on the case, the approach may include:

• Standstill or forbearance arrangements to prevent enforcement
• Amendments to repayment schedules and covenant resets
• Interim liquidity support or new money access with protective rights
• Selective asset monetisation in a controlled manner
• Adjustments to security and intercreditor arrangements
• Strengthened governance and reporting to enhance lender confidence

These measures require a combination of legal insight, financial analysis and practical sector knowledge.

Building Consensus Across Stakeholders

Designing a restructuring plan is only one part of the matter. The real challenge lies in aligning different interests.

Banks must operate within regulatory constraints. Secured lenders assess whether negotiated recovery exceeds enforcement value. Shareholders evaluate dilution and long-term direction. In transport and logistics matters, contractual relationships with port authorities, lessors and service providers add to the complexity.

Legal counsel plays a central role in balancing rights, maintaining momentum in discussions and facilitating consensus.

A Familiar Scenario in Logistics

A container handling company was facing declining volumes and approaching repayment obligations. Any public insolvency process would have risked regulatory licences, key customer contracts and employment at a large scale.

A confidential and consensual restructuring process enabled:

• Extension and reprofiling of facilities

• Additional capital support from stakeholders

• Disposal of non-core assets in an orderly manner

• Continuity of critical port operations

The company remained fully operational and creditors safeguarded their economic interests. No statutory insolvency procedure was required.

Why Timing Matters

If enforcement actions have already commenced or if liquidity has fully deteriorated, the range of available solutions reduces sharply. Early engagement allows:

• A wider set of restructuring tools

• A stronger negotiating position

• Better protection against rapid loss of value

• Well timed intervention can be the difference between restructuring a business and winding one down.

Final Perspective

Out-of-court restructuring has become a recognised and reliable approach in India’s corporate recovery landscape. It allows viable businesses facing temporary imbalance to protect operations, reputation and economic value while navigating a path back to stability. A financial challenge does not need to result in the dismantling of a business that still has commercial purpose. With informed coordination and a structured plan, it is possible to preserve what matters most.

Target Audience:

• Senior management and Boards of Directors of financially stressed companies in India

• CFOs and Finance Leaders evaluating restructuring pathways

• Creditors including banks, NBFCs and financial institutions

• Private equity sponsors and institutional investors

• Maritime, shipping, ports and logistics sector operators facing liquidity pressure