"EXIT STRATEGIES FOR MULTINATIONAL COMPANIES IN INDIA: A COMPARATIVE LEGAL ANALYSIS OF CLOSURE MECHANISMS UNDER THE IBC AND COMPANIES ACT"

India’s corporate landscape includes a significant number of Multinational Companies (MNCs) operating through wholly owned subsidiaries, joint ventures, or branch/liaison offices. These entities may at some stage consider closure or exit from the Indian market due to strategic realignment, financial distress, regulatory challenges, or other commercial considerations.

Exit strategies for MNCs in India involve a range of legal, financial, and operational considerations to ensure a smooth and compliant withdrawal from the market. The primary objective is to present a comprehensive and comparative analysis of the legal framework governing the closure of Multinational Companies (MNCs) operating in India, based on their solvency status. In the dynamic and evolving landscape of global business, MNCs often reassess their market presence and may choose to exit jurisdictions for strategic, financial, or operational reasons. In such instances, understanding the legal options and procedural requirements for closure becomes critical.

There are two principal legislative frameworks governing corporate exit in India- Insolvency and Bankruptcy Code, 2016 (IBC), and the Companies Act, 2013. Their primary focus is to delineate the exit mechanisms available to multinational corporations, both in situations of solvency and insolvency, through a critical analysis of the key legal processes prescribed under these statutes.

Through a detailed examination of these legal pathways, it is aimed to provide clarity on the conditions, procedural timelines, regulatory authorities involved (such as the National Company Law Tribunal (NCLT), Registrar of Companies (ROC), and Insolvency and Bankruptcy Board of India (IBBI)), and compliance requirements relevant to each mode of closure.

By bridging the legal and procedural understanding of company closure mechanisms, this study aims to contribute to better strategic decision-making for MNCs contemplating an exit from the Indian market, while also offering policy insights that may inform future legislative reforms.

Classification of Companies Based on Solvency

Legal procedures vary based on the financial position of the company:

a) Solvent Companies

Entities that can pay off their debts as they fall due. Closure mechanisms include:

●     Strike-off under Section 248 of the Companies Act, 2013

●     Voluntary Liquidation under Section 59 of the IBC, 2016

●     Winding Up of Companies under Section 271 of the Companies Act

b) Insolvent Companies

Entities unable to pay debts. Closure is initiated through:

● Corporate Insolvency Resolution Process (CIRP), followed by liquidation under IBC followed by liquidation

●     Winding Up of Companies- Section 271 of the Companies Act