Lenders Law

Loans against shares (LAS) to listed companies or their promoters are often perceived as low-risk, fully secured exposures —especially when the initial Loan-to-Value (LTV) appears comfortable (2x cover). In reality, equity-backed lending is one of the fastest deteriorating credit exposures if governance, monitoring, and documentation are weak . This blog sets out everything lenders should evaluate before and after sanction . Understand the Risk: Shares Are Not Static Collateral: Unlike real estate or fixed assets, listed shares: Are marked-to-market daily; Are exposed to price volatility, liquidity risk, and sentiment shocks; Can lose value before the lender is operationally ready to act. A “2x cover” at sanction is only a point-in-time comfort , not a risk mitigant by itself. Initial LTV Is Only the Entry Point — Stress Testing Is Critical: Before sanction, NBFC should stress-test: 30/60-day average; Fall in trading volumes during market stress; Impact of simultaneous i...

The Hon'ble Supreme Court’s ruling in  EPC Constructions India Ltd. v. Matix Fertilizers and Chemicals Ltd.   (2025) clarifies that preference shares—however structured—remains part of a company's share capital, and cannot be regarded as "debt". Even if classified as “financial liability” under Ind AS 32, legal character under the Companies Act still governs enforceability. A cautionary tale for investors and creditors relying on redeemable or “put option” structures to secure repayment.  The Case in Brief In EPC Constructions (supra), the appellant had over ₹400 crores in receivables for project work. The appellant/ former operational creditor agreed to convert its dues into 8% Cumulative Redeemable Preference Shares (CRPS)—redeemable in three years. When the respondent/ debtor failed to redeem, the appellant (then in liquidation), through its liquidator, filed a Section 7 petition under the Insolvency and Bankruptcy Code (IBC), claiming default on redemption. Both ...

When an operational creditor issues a demand notice under Section 8 of the Insolvency and Bankruptcy Code, 2016 , the corporate debtor has 10 days to: Repay the amount due, or Bring to notice the existence of a dispute . Sometimes, the real issue arises when a reply is sent — but instead of being a genuine dispute, it is a tactic to stall or avoid insolvency proceedings, or instead of a full reply, the corporate debtor sends an “interim reply” within those 10 days — saying something like “ We are in the process of preparing a detailed response to the Demand Notice. Meanwhile, we request you to kindly treat this communication as our interim/ holding response” .  Now, the question which arises here is: does this obligate the creditor to wait further before filing an application under Section 9? The Legal Framework Statutory Timeline : The Code strictly prescribes 10 days from receipt of the Section 8 notice. There is no provision for extending this timeline merely bec...