COMPREHENSIVE EXIT STRATEGY EXECUTED FOR U.S PARENT’S INDIAN SUBSIDIARY

The client, a U.S.-based parent company, engaged us to design and execute a comprehensive exit strategy for its Indian subsidiary. The scope of the engagement included an orderly winding down of operations, recovery of assets, resolution of outstanding obligations, and distribution of any surplus funds to the shareholders based in the United States, in compliance with applicable legal and regulatory requirements.

Following a detailed evaluation of available exit routes for the Company, Liquidator finds Voluntary Liquidation under Section 59 of the Insolvency and Bankruptcy Code, 2016 as the most suitable option with the company being financially stable and to also reclaim/recover the surplus funds through Voluntary Liquidation under Section 59 of the Insolvency and Bankruptcy Code, 2016.

Recognizing the diminishing commercial viability of the subsidiary, the Board approved the initiation of voluntary liquidation proceedings under the Insolvency and Bankruptcy Code, 2016.

The Crisis: Trade Payables Pile Up

Despite maintaining overall financial stability, the subsidiary encountered a significant operational challenge in the form of substantial trade payables owed to its parent company. These outstanding intercompany liabilities posed potential complications for an orderly and timely closure of operations. If not addressed appropriately, they could lead to delays in closure, issues in financial reconciliation, and regulatory or compliance concerns. Accordingly, it became essential to adopt a structured and strategic approach to settle and reconcile these dues, ensuring proper documentation and alignment, thereby facilitating a smooth and compliant closure process.

Role of the Firm and Strategic Execution

The Firm approached the engagement with a structured and detail-oriented methodology, combining technical expertise with strategic foresight. The key steps included:

• Set-off Trade Receivables against Trade Payables: Identifying and offsetting as per the provisions of Regulation 28 of the IBBI (Voluntary Liquidation process) Regulations, 2017, the Liquidator has made a mutual set off between the Trade receivables & Trade payables, effectively reducing the net liability burden of the Company.

This approach transformed what initially appeared to be a liability-heavy balance sheet into a manageable and compliant financial structure, enabling smoother liquidation proceedings.

Through Firm’s strategic financial adjustments, trade payables were effectively neutralized against Trade receivables, enabling the company to settle obligations without disputes. The subsidiary was subsequently dissolved in accordance with legal provisions. Importantly, the entire process avoided Prolonged litigation, regulatory penalties & d Disruptions to stakeholder relationships.

This engagement stands out as a success for No cash flow issued. Vendor relationships were preserved through professional handling of obligations, maintaining goodwill with service providers. The company achieved a clean financial closure, with the balance sheet systematically resolved and no residual liabilities remaining. Additionally, what began as a liability challenge was transformed into a compliant and efficient capital adjustment, creating strategic value. Throughout the process, strict adherence to the Insolvency and Bankruptcy Code ensured complete regulatory compliance.

Conclusion

This case exemplifies how a well-planned exit strategy, backed by Firm’s technical expertise and disciplined execution, turned a complex business closure into a smooth and value-driven process. The Firm’s ability to align legal frameworks, financial restructuring, and stakeholder management underscores the importance of strategic advisory in corporate exits.