Muddling regulations

Insolvency resolution should not be weakened

A new Securities and Exchange Board of India (Sebi) discussion paper proposes minority shareholders be given the chance to reinvest in companies undergoing corporate insolvency resolution. While this may offer minority shareholders a second chance at wealth creation, it may also interfere with the resolution process by making takeovers less attractive and adding to the already formidable complexity of restructuring. In bankruptcies, minority shareholders suffer losses. There are discounts to the share price and often huge equity dilutions involved in taking over bankrupt firms. The acquirer often ends up with 100 per cent (or near 100 per cent stake) and