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VOL. 11, ISSUE 1 (2026)
Evaluating the role of insolvency and bankruptcy frameworks in enhancing startup and MSME sustainability in India
Authors
Anil Kumar K T, Dr. Neeru Gupta
Abstract
This study evaluates
the impact of India's Insolvency and Bankruptcy Code (IBC), 2016 on the
sustainability of startups and Micro, Small and Medium Enterprises (MSMEs).
Employing a hybrid legal research approach integrating doctrinal analysis,
empirical evaluation, and comparative legal methodology, the study finds that
while the IBC has significantly strengthened India's insolvency resolution
ecosystem, the outcomes for startups and MSMEs remain uneven. Structural and
procedural bottlenecks, including high resolution costs, rigid statutory
timelines, and limited access to interim financing, disproportionately impact
smaller enterprises. For startups, the IBC's valuation mechanisms often fail to
capture the value of intangible assets, leading to undervaluation and
liquidation. MSMEs face challenges arising from their operational structure and
limited financial resilience, with the majority of insolvency cases resulting
in liquidation rather than successful resolution. Comparative analysis reveals
that India can draw lessons from international insolvency frameworks
prioritizing business reorganization and debtor-in-possession financing. The
study concludes that while the IBC has marked a transformative shift in India's
insolvency landscape, its ability to support startup and MSME sustainability
remains limited by procedural, structural, and market-based constraints. Future
reforms emphasizing cost-effective restructuring pathways, specialized
institutional capacity, and valuation methodologies suitable for intangible-asset-driven
business models are necessary to enhance the IBC's effectiveness in promoting
entrepreneurial resilience and long-term economic growth.
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Pages:21-25
How to cite this article:
Anil Kumar K T, Dr. Neeru Gupta "Evaluating the role of insolvency and bankruptcy frameworks in enhancing startup and MSME sustainability in India". National Journal of Multidisciplinary Research and Development, Vol 11, Issue 1, 2026, Pages 21-25
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