Chinna Aswathy Abraham – Senior Associate
Introduction
Unlike ordinary businesses that possess tangible assets such as factories, warehouses, or machinery, asset-light entities derive their value from intangible assets, including intellectual property, technological platforms, services, and brand equity. To minimize capital expenditure and operational costs, such companies outsource resource-intensive operations, such as manufacturing and logistics, and often rely on leasing or renting assets. In essence, asset-light businesses prioritize operational efficiency and scalability over investments in fixed assets.
A prominent example is ‘Zomato’, as it operates as a platform that connects various restaurants and customers, without owning any delivery fleets. Similarly, companies like ‘Uber’ and ‘Ola’ that operate within the ride hailing sector also function with minimal ownership of physical assets. They simply leverage technology and a network of independent drivers. Although these Companies face reduced risk in terms of asset depreciation, maintenance costs etc, they are often over reliant on external funding and have high customer acquisition and retention costs.
‘Byju’s’ once a leading EdTech company in India, invested heavily in celebrity endorsements and sponsorships while relying on venture capital to drive growth. Although Byju’s prospered during the COVID-19 pandemic, the reopening of schools diminished demand for online learning, severely affecting its revenue. The company faced significant financial distress due to increasing debt and challenges in securing further funding. With its value tied primarily to its brand, customer base, and digital intellectual property, and lacking substantial physical assets, Byju’s creditors faced significant difficulties recovering dues. It is thus safe to say that these lean businesses encounter unique obstacles within India’s insolvency framework, which is primarily designed for asset-heavy enterprises.
Interestingly, these challenges are not restricted to the digital-first businesses like Ed-tech, e-commerce, online-food delivery or ride-hailing platforms that are evidently technology-driven, but also prevalent within the aviation sector, which at first may appear to be asset-heavy.
While ‘Jet Airways’ owned some of its aircraft, ‘Go First ‘operated with an almost entirely leased fleet and equipment, with their value tied to brand reputation, customer loyalty and valuable airport landing slots. When these airlines encountered financial turbulence, the lessors quickly moved in to repossess the aircrafts and equipment, leaving the airline with minimal operational assets to remain a going-concern, creating uncertainty for creditors, employees, and passengers alike.
Unique Challenges Faced by Lean Companies
- Valuation of Intangible Assets
One of the biggest hurdles is in the valuation of intangible assets like brand value, customer goodwill, etc. that are highly sensitive to market perception. The news that a company has been admitted into the Corporate Insolvency Resolution Process (‘CIRP’) can lead to significant reputational damage for these businesses. This coupled with adverse media coverage, operational disruptions, or legal conflicts, diminishes the perceived worth of these assets, complicating efforts to attract buyers or support elevated valuations. Further, unlike tangible assets that can be valued using market-based or cost-based approaches, the lack of standardized valuation methods for intangible assets also poses a challenge, as it leads to subjective or conservative estimates. Many Resolution Professionals have also expressed difficulty in assessing whether such assets are likely to contribute to recovery or whether they should be written off as non-recoverable. To address these challenges, the Resolution Professionals must engage specialized valuation experts at the beginning of the insolvency process, maintain operational continuity and preserve asset value, which is easier said than done.
- Lack of Technical Proficiency
Asset-light companies involved in technology, e-commerce or service-based sectors possess large datasets, including data, transaction logs and digital assets, stored across cloud platforms, databases or third-party systems. Resolution Professionals typically trained in finance, accounting or law may lack the technical proficiency to handle big data analytics tools. Without expertise in data analytics, the Resolution Professionals may struggle to extract meaningful insights from these complex datasets, leading to inaccurate valuations or missed opportunities to identify value-maximising strategies. Understanding the digital infrastructure of these companies is also crucial for the Resolution Professional or even the Committee of Creditors to evaluate the feasibility of proposed Resolution Plans and negotiate with stakeholders.
- Conflicts in Priority & Security Interests
When an asset-light company has multiple bilateral lenders with diverse loan agreements, forming a Committee of Creditors becomes a challenge. These bilateral lenders may hold different types of claims, and the non-standardization of documentation can result in disputes over priority, especially considering these companies lack physical collateral. For instance, one lender’s agreement might claim a charge over future cash flows, while another might claim rights over intellectual property, leading to legal challenges in determining hierarchy under Section.53 of the IBC, 2016.
- Obtaining Interim-Finance
Another critical challenge is securing funding during the insolvency process. Traditional lenders are often reluctant to provide interim finance without collateral, which asset-light companies typically lack. Without this financial support, these businesses struggle to sustain operations during the resolution process, making successful restructuring far less likely and increasing the risk of liquidation.
To combat this issue, several jurisdictions across the world have developed their own unique mechanisms to assist the asset light companies during the insolvency process In Australia, for instance, the Assetless Administration Fund (AA Fund)[1] helps finance the liquidation of companies without assets, ensuring public interest is protected. At present, India does not have a dedicated mechanism to address these issues. The CIRP of Alok Industries Ltd[2], which was India’s first case of interim finance, and Bharti Defence and Infrastructure Ltd[3] have shown that securing interim finance is possible, but these remain exceptions rather than the norm, as creditors shy away from ‘putting good money after bad money’ and prioritize repayment.
One potential solution is Third-Party Funding (TPF), where external financiers cover insolvency-related expenses in exchange for a share of recoveries. This model allows insolvency professionals to pursue claims without bearing financial risks. However, India’s legal framework lacks clear guidelines for TPF in insolvency cases, making it essential to develop regulations that ensure ethical and transparent implementation.
- Limited Assets for Recovery
Unlike traditional businesses with tangible assets like land, buildings, or machinery that can be liquidated, service-based or digital companies often lack substantial assets for sale. This complicates out-of-court settlements and limits meaningful recovery, especially as revenues decline.
Under Section 53(1) of the Insolvency and Bankruptcy Code (IBC), asset distribution follows a strict hierarchy: insolvency process costs are prioritized, followed by workmen’s dues, secured creditors, employee salaries, and, lastly, unsecured creditors. In asset-light firms, the available resources are depleted for meeting the higher-priority claims, leaving little to nothing for those lower in the order.
There is also no legal mandate requiring digital or service-based companies to hold physical assets. While intangible assets, such as proprietary software, source codes or brand names, may exist, it may not be of much value during a time of financial distress. Source code tailored for specific applications often lacks broader market appeal, and brand value diminishes significantly in a distressed company, often resulting in disappointing outcomes for creditors seeking to recoup losses.
While the IBC does not have a separate regime for asset-light companies, recent developments between 2023 and 2025 reveal a significant shift towards creating a more nuanced framework that recognizes the unique value drivers of these entities, focusing on intangible assets, specialized resolution mechanisms, and the adoption of international practices.
Regulatory and Legislative Developments
Recent regulatory updates and proposed laws aim to enhance transparency and establish tailored frameworks for asset-light sectors. The Insolvency and Bankruptcy Board of India (IBBI) introduced the (Insolvency Resolution Process for Corporate Persons) (Second Amendment) Regulations, 2023, which include procedural changes that indirectly support resolving asset-light companies. Amendments to Form G (Invitation for Expression of Interest) now require a website URL with the corporate debtor’s financial statements and creditor lists. This increased openness helps potential bidders evaluate companies whose value lies in intellectual property, brand equity, or data rather than physical assets.
New timelines for issuing the Request for Resolution Plans (RFRP) and Information Memorandum (IM) ensure a more organized and efficient process. For asset-light businesses, where going-concern value can decline rapidly, this speed is vital. The RFRP must be issued within five days of finalizing the list of resolution applicants.
Proposed Cross-Border Insolvency Framework
India is working toward adopting the UNCITRAL Model Law on Cross-Border Insolvency. This is a significant step for asset-light companies, especially in tech and service sectors with global operations, overseas assets, and foreign creditors.
Cases like Jet Airways[4] and Videocon Industries[5] exposed challenges in coordinating with foreign courts and handling overseas assets without a formal framework. A framework will enable cooperation between Indian and foreign courts, recognize foreign insolvency proceedings, and allow Indian resolution professionals to seek assistance abroad. This is essential for securing and monetizing intangible assets like patents, trademarks, or data held overseas.
In March 2025, the Singapore High Court, in Re Compuage Infocom Limited[6], recognized Indian CIRP proceedings under UNCITRAL, enabling asset repatriation for a tech debtor. This judicial step highlights the need for a reciprocity clause. The Insolvency and Bankruptcy Code (Amendment) Bill, 2025, introduced in August 2025, advances ‘IBC 2.0.’ It introduces frameworks for group and cross-border insolvencies, suited for asset-light conglomerates with global subsidiaries. India’s proposed law includes unique features, such as a reciprocity requirement (recognizing proceedings only from countries offering similar treatment) and a provision allowing the Central Government to object to recognition on public policy grounds
Specialized Legislation for the Aviation Sector
The Protection of Interests in Aircraft Objects Act, 2025, is a key development for the aviation industry, an asset-light sector reliant on leased assets. The Act adopts the Cape Town Convention[7] and its Aircraft Protocol[8] into Indian law, offering stronger protection for international creditors and lessors of aircraft and engines. During an airline’s insolvency, the Act requires the insolvency professional to return leased aircraft to creditors within a two-month “waiting period,” overriding the IBC’s general moratorium and aligning India’s aviation insolvency regime with global standards.
Innovations in Resolution Mechanisms
The IBC framework has always included intangible assets and intellectual property in a corporate debtor’s estate. Recent practices and judicial comments increasingly highlight their importance in valuation and resolution.
NCLT orders have recognized the significance of brand value, goodwill, and uncalled capital as key intangible assets. The absence of such assets is viewed as a major barrier to achieving a going-concern sale. A study conducted by IIM Ahmedabad and reported by IBBI[9] questioned the traditional belief that asset-heavy industries yield higher recoveries, finding that asset-light sectors like “Hotels and Restaurants” and “Wholesale & Retail Trade” showed strong recovery rates for both financial and operational creditors, indicating that the market effectively values the going-concern worth of these service-oriented businesses.
A 2022 IBC amendment[10] formally allowed separate resolution plans for distinct assets or business units of the corporate debtor. This is a major step for asset-light companies, enabling bidders to target specific valuable components, such as a brand, software platform, or client portfolio, without taking on the entire corporate structure. This maximizes value by attracting specialized buyers and has been particularly effective for real estate projects and companies with diverse service lines.
The Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) (Fourth Amendment) Regulations, 2025, effective May 2025, further refines this by requiring three flexible plan formats: whole-entity, asset-specific, or combined.[11] This allows resolution professionals to auction discrete intangibles like proprietary algorithms or customer databases, as seen in emerging tech resolutions.
While still developing, a formal group insolvency framework is emerging, with the Videocon group resolution serving as a test case. This mechanism will enable a unified resolution strategy for multiple related entities, common among startups and tech companies with complex subsidiary networks.
Conclusion
Asset-light companies are reshaping India’s economic landscape, offering innovation and scalability with minimal physical infrastructure. However, their unique structure exposes deep vulnerabilities within the existing insolvency framework, which remains heavily geared towards asset-heavy enterprises. Challenges such as valuing intangible assets, lack of technical proficiency among insolvency professionals, and limited avenues for interim finance significantly hinder effective resolution. Encouragingly, recent legal and regulatory developments—from the proposed cross-border insolvency framework to sector-specific laws—signal a shift towards more nuanced approaches. For these reforms to truly empower resolution outcomes, policymakers must continue fostering specialized expertise, transparent valuation practices, and adaptive financial instruments. As India moves towards a more digitized, service-driven economy, a robust, inclusive insolvency regime tailored for asset-light models is not just necessary—it is inevitable.
[1] John Winter, Insolvency Reform: PJC Inquiry Into Corporate Insolvency In Australia – Report Findings, 35(3) Australian Restructuring Insolvency & Turnaround Association Journal,10, 10–13 (2023), Available at https://search.informit.org/doi/10.3316/informit.319935395720736.
[2] Apna Organics Pvt. Ltd. and Ors. vs. Alok Industries Ltd. and Ors., MANU/NC/11759/2019.
[3] Dhinal Shah vs. Bharati Defence and Infrastructure Ltd., MANU/ND/2256/2019.
[4] State Bank of India and Ors. vs. Jet Airways (India) Ltd., MANU/ND/7877/2019.
[5] State Bank of India vs. Videocon Industries Ltd., MANU/NC/1501/2021.
[6] Re Compuage Infocom Ltd. & Ors. [2025] SGHC 49: MANU/SGHC/0055/2025.
[7] The Convention on International Interest in Mobile Equipment, Nov. 16, 2001.
[8] The Protocol on Matters Specific to Aircraft Equipment, Nov. 16, 2001.
[9] M.P. Ram Mohan & Balagopal Gopalakrishnan, Report of Study on Effectiveness of Resolution Process: Firm outcomes in the post-IBC period, IIM Ahmedabad, Aug (2023), Available at https://ibbi.gov.in//en/resources/reports.
[10] The Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) (Amendment) Regulation, 2016, IBBI/2022-23/GN/REG093 (w.e.f. 16-09-2022).
[11] The Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulation, 2016, Reg. 36A(1A).
