The unbundling of the Good Glamm Group is now in motion. One by one, its portfolio brands – from The Moms Co to ScoopWhoop, are either up for sale, under negotiation, or being reclaimed by their original founders. What once promised to be India's first scaled content-to-commerce unicorn is now navigating its exit in fragments.
This brand-by-brand carve-out isn't uncommon in founder-led groups that scale faster than their internal systems. But the Good Glamm case is instructive because of its structure and the timing of its public unraveling.
For lawyers advising founders, lenders, or buyers in similar situations, the key question is not "how did it fall apart?" but "how is this break-up being engineered and who is liable for what?"
Breaking Apart a Startup Without Formal Insolvency
The Good Glamm break-up is not being conducted under the IBC. No formal insolvency has been triggered, at least not yet. But in many ways, the process resembles a soft insolvency scenario (where brand sales, founder exits, and informal settlements are managed without judicial process).
In such cases, lawyers must watch for:
- Selective brand monetization: Are only the revenue-generating brands being packaged for exit while the liabilities remain isolated?
- Contingent creditor risk: Are pending litigation, vendor dues, or employment claims being disclosed to potential buyers?
- Director duties: At what point does the informal dismantling of the group trigger scrutiny of board conduct or statutory non-compliance?
This is the "grey zone" of corporate collapse — legally alive, but financially decomposing.
Personal Liability in the Absence of IBC
Much of the media commentary has focused on Good Glamm's founder, Darpan Sanghvi, and his pledge to personally repay up to INR 100 crore of group liabilities. But outside of a formal insolvency proceeding, what does this actually mean in enforceable legal terms?
Key legal considerations:
1. Voluntary repayment does not equal admission of liability
Unless formal guarantees or acknowledgments exist, personal restitution doesn't convert into enforceable debt.
2. No protection under IBC moratorium
If a company avoids IBC but the founder makes personal restitution, they do so without the legal protections of Section 14 of the IBC.
3. Potential for unequal treatment
Personal repayment to selective vendors could be interpreted as preferential treatment opening up founders to challenges under Section 43 (preferential transactions) if IBC is triggered later.
For lawyers advising founders, the key is to structure any personal commitment formally and narrowly, ideally through a private agreement that does not open floodgates for other creditors.
What Founders Overlook in Brand Break-Up Scenarios
In high-growth, founder-driven businesses, a few patterns are common:
- Cross-holding across entities: Founders often own multiple brands via different legal structures: LLPs, PVT LTDs, and JV vehicles. But they end up treating them operationally as one. This creates complexity during unwinding.
- Unseparated liabilities: Brands that were acquired are often integrated operationally, but not structurally. Employee contracts, vendor agreements, or IP licenses may still sit with the parent entity, complicating carve-outs.
- Delayed disclosures: Investors and lenders are sometimes not kept fully informed during internal restructuring, especially if the founder believes a "controlled transition" will fix the cash flow gap.
This creates legal exposure for all parties involved, including buyers who pick up these brands mid-transition.
Caution for Lenders, Buyers, and Founders
For Lenders:
- Assert charge hierarchy early: In a soft restructuring, lenders should formally notify the company of any charge enforcement intent, even if informal deals are underway.
- Demand carve-out disclosures: Any brand sale must disclose debt allocations, employee transitions, and IP liabilities.
- Secure board minutes and legal opinions on each transaction – soft exits often skip documentation in the rush to "save value."
For Buyers:
- Insist on indemnity structures: Especially if the acquiring entity is absorbing employees or assets previously entangled in litigation or unpaid obligations.
- Conduct layered due diligence: Beyond financials, check IP registrations, media rights, and influencer contracts for validity post-separation.
- Scrutinize founder-retention deals: If the founder is being retained post-sale, clarify scope, compensation, and risk shielding.
For Founders:
- Avoid "gesture-based" repayments: If offering personal settlement, do so through carefully drafted, limited-scope contracts.
- Don't bypass formal closures: Neglected ROC filings, unpaid PF, or unadjudicated employee terminations can come back post-sale.
- Keep a single point legal advisor across group entities: Brand break-ups handled by separate law firms per entity often lead to strategy mismatch and exposure blind spots.
How This Differs From an IBC Proceeding
In a formal insolvency:
- The resolution professional takes charge
- Moratorium shields the company from legal action
- Creditors are ranked and satisfied via a defined waterfall
In a founder-managed break-up:
- Informal deal-making dominates
- Reputation often drives pace and visibility
- Legal exposure varies case by case, and is easily underestimated
But once liabilities are large or creditors begin enforcing, the risk of sudden transition into IBC territory becomes real.
The Legal Infrastructure for Founder-Led Collapse Is Still Evolving
Good Glamm's unraveling is not an anomaly. It's a symptom of an ecosystem where structuring, legal hygiene, and liability allocation haven't caught up with growth.
So ultimately, it's not about how to clean up after collapse, it's about how to anticipate soft distress before it explodes.
The controlled demolition of multi-brand enterprises requires the same legal sophistication as their construction is something the Indian startup ecosystem is still learning to implement systematically.
Founder-led business break-ups outside formal insolvency proceedings create complex liability allocation challenges, requiring structured legal frameworks to protect all stakeholders while preserving asset value during controlled dismantling processes.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
