How the Companies Act 2013 and IBC Reshaped Indian Capitalism
PM Narendra Modi holds meeting with Defence Minister Rajnath Singh and chiefs of Armed Forces on Friday (Image credit PMO, X)
From Big Bang to Daily Grind- How the Companies Act 2013 and the IBC Have Changed Indian Capitalism – And Where They Have Fallen Short
By P. SESH KUMAR
New Delhi, November 29, 2025—The Companies Act 2013 and the Insolvency and Bankruptcy Code 2016 were sold as India’s twin structural revolutions: one to civilise corporate governance and disclosure, the other to end the era of “phone-banking” and evergreening by putting fear into errant promoters. A decade later, the picture is more nuanced. There is unquestionably more transparency, more independent oversight and a functioning insolvency pipeline, but also a trail of avoidable ambiguities, legislative U-turns, massive haircuts, long delays and uneven enforcement.
The story of the Companies Act 2013 begins in the shadow of Satyam and a string of governance scandals that convinced policymakers that India’s half-century-old 1956 Act was simply out of tune with global standards. The 2013 law promised a modern corporate state: sharper boards, empowered independent directors, mandatory audit committees, rotation of auditors, class-action suits, tighter related-party transaction rules, codified duties of directors, recognition of small and one-person companies, and the headline-friendly corporate social responsibility mandate.
For the first time, the statute spoke the language of stakeholders and sustainability, not just shareholders and balance sheets. On paper, the architecture was impressive and subsequent amendments in 2015, 2017, 2019 and 2020 tried to move the needle further towards better disclosure and stricter enforcement, even setting up the National Financial Reporting Authority (NFRA) as a powerful accounting and auditing watchdog.
Yet the very breadth and ambition of the 2013 law produced its own contradictions. Several provisions were drafted with fuzzy edges: key expressions such as “related party”, “beneficial interest”, “control”, “independent director” and “oppression and mismanagement” were left open-textured, inviting litigation and regulatory overreach. Scholars have pointed out that the Act, despite positioning itself as a corporate governance code, does not always define oppression and mismanagement with the clarity one would expect, leaving minority shareholders to navigate an uncertain remedial landscape.
The CSR regime oscillated from near-criminalisation of non-compliance to later decriminalisation and rationalisation, betraying the fact that the original drafting underestimated the compliance burden and overestimated the state’s ability to police thousands of companies. Similarly, the initial insistence on deposit rules, insider-lending restrictions and layer-upon-layer of approvals triggered a barrage of representations from industry, leading to a series of quick-fire amendments and circulars that made the law feel like a moving target.
The result has been a corporate statute that certainly raised the floor of governance but also created a culture of box-ticking. Large listed entities and multinationals adapted reasonably well; the law spoke their language and they had the advisors to decode it. For mid-sized and closely-held companies, however, the compliance maze and fear of inadvertent violation often pushed entrepreneurs towards defensive formalism rather than genuine governance transformation.
Enforcement, predictably, has been uneven. A few headline-grabbing prosecutions and NFRA (it itself was a badly drafted legislation with too many loose ends so much so, its jurisdiction and powers are still under review by no less than the Supreme Court) actions coexist with a long tail of chronic non-filers, shell entities and vanishing companies that continue to slip through the cracks.
If the Companies Act 2013 was meant to keep companies honest in good times, the Insolvency and Bankruptcy Code 2016 (IBC):was designed to deal with them when things went horribly wrong. The IBC’s promise was disarmingly simple: a single, time-bound process, creditor-in-control, with a hard outer limit of 180 days extendable to 330 days, and liquidation as the default if no resolution plan emerged.
For banks sitting on mountains of bad loans, the code looked like a bazooka after decades of pop-gun recovery laws. The early cases, especially Essar Steel, Bhushan Steel, Alok Industries and others from the Reserve Bank of India’s “dirty dozen”, seemed to vindicate the model by delivering large resolutions and signalling that promoters could no longer treat banks as patient partners in default.
But as the pipeline thickened, the structural cracks became visible. Delays multiplied, often driven by litigation over admission, eligibility under section 29A, treatment of different classes of creditors and interpretation of resolution plans. The original ideal of finishing in 180 days has been swamped by reality: average resolution times have hovered at roughly double the statutory outer limit, and the latest data show that cases taking longer than 330 days deliver sharply lower recoveries.
Across the life of the regime, creditors have realised only about 31–33 per cent of admitted claims on average, meaning haircuts of nearly 70 per cent, although realisations as a percentage of liquidation value look far better. The big message for borrowers is mixed: fear of losing control has definitely driven many out-of-court settlements, but for several high-profile failures, the IBC process has translated into socialised losses, where taxpayers, small investors and homebuyers absorb massive value destruction while new acquirers scoop up assets at deep discounts.
Legislative design, too, has been far from flawless. The need to repeatedly amend the Code-via ordinances and later Acts in 2018, 2019 and 2021-betrays the fact that key questions were either left unresolved or were misjudged at the drafting table. Homebuyers, for instance, had to be retro-fitted into the framework as financial creditors after intense lobbying and judicial debate.
The famous section 29A, intended to keep defaulting promoters out, was introduced as an amendment once it became clear that original provisions allowed them back in through clever structuring. Timelines were belatedly formalised to 330 days when it became obvious that the process was drifting. Pre-packaged insolvency was introduced, but only for MSMEs, and cross-border insolvency remains parked in consultation papers rather than in a binding statutory regime.
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Institutional capacity has been the other Achilles’ heel. The National Company Law Tribunal (NCLT) and its appellate body (NCLAT) simply do not have the bench strength and infrastructure to handle the volume and complexity of IBC litigation, let alone play a proactive role in steering time-bound outcomes.
In the absence of a strong, specialised bench, the promise of swift, commercial decision-making often gives way to procedural wrangling, frequent adjournments and appeals that climb all the way up to the Supreme Court. Insolvency professionals and valuers, the new technocratic class empowered by the Code, have grown in number and experience, but questions remain about the consistency of valuations, conflicts of interest and the robustness of monitoring post-resolution.
Have these two statutes, taken together, delivered on their grand promises? The honest answer is: partially, and unevenly. There is no doubt that corporate governance discourse in India is sharper because of the Companies Act 2013, and that promoters now live with the shadow of IBC in a way that was unthinkable under the old BIFR and DRT regime.
Pre-IBC, creditors recovered barely a quarter of their claims through scattered laws; under IBC, this has improved to roughly one-third overall and considerably more in certain sectors and time-bound cases. Market discipline is real: boardrooms worry about independent directors walking out, auditors refusing to sign off, and lenders pulling the IBC trigger.
Yet the failures are equally real. The Companies Act still leans heavily towards formal compliance. It has not prevented spectacular governance implosions in NBFCs, real estate conglomerates and listed entities where all the right committees technically existed. Many ambiguities could have been ironed out with more careful drafting and phased introduction, instead of front-loading complexity and then scrambling to amend under industry pressure.
Meanwhile, IBC has not quite delivered the dream of quick, high-value resolutions. For many creditors, especially public sector banks, it has become a last-resort haircut machine: better than the old system, but still far from a credible deterrent. For workers, small suppliers and retail investors, the new regime often feels like a technocratic script where their claims are procedurally acknowledged but substantively marginal.
The deeper critique is that both laws have tried to legislate virtue without fully investing in institutions. A dense Companies Act without a nimble Registrar system, serious prosecution capacity and high-quality adjudication risks becoming a compliance ritual. A sophisticated IBC without adequately staffed tribunals, transparent information utilities, and deep domestic capital pools for stressed assets risks sliding into a bargaining arena dominated by a handful of buyers and well-lawyered financial creditors.
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Put Muscles and Nerves on Skeleton
If the first decade of the Companies Act 2013 and the IBC has been about building a legal skeleton, the next decade must be about putting muscles and nerves into that structure. The corporate law side needs a decisive shift from box-ticking to behaviour change. That means pruning overlapping provisions, clarifying vague terms, de-cluttering CSR and related-party regimes, and aligning the enforcement playbook so that regulators focus on serious misconduct rather than low-risk filing lapses.
For the IBC, the priority is speed with integrity: dramatically augmenting NCLT capacity, ring-fencing insolvency benches, tightening admission filters to discourage tactical filings, and making pre-insolvency workouts and out-of-court agreements a robust, supervised alternative rather than a shadowy parallel universe. Haircuts must be made politically and economically defensible through better valuations, higher participation of competitive bidders and transparent disclosure of who gains and who loses in each resolution.
In parallel, we must finally legislate a comprehensive cross-border insolvency framework, widen pre-pack options beyond MSMEs, and integrate early-warning systems in banking regulation so that IBC is invoked while value still exists, not after assets have been stripped bare. On the governance front, a smarter use of technology, contemporaneous disclosures and real-time red-flags can do more to prevent corporate failure than another round of paper-heavy amendments.
Ultimately, the real test of these statutes will not be the number of sections they carry or the frequency of amendments they attract, but whether they create a culture where honest entrepreneurs can thrive, capital is recycled swiftly from failure to new opportunity, and corporate India learns that accountability is not a seasonal slogan but the price of access to public money.
(This is an opinion piece, and views expressed are those of the author only)
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