The Insolvency and Bankruptcy Board of India introduces amendments to the Corporate Insolvency Resolution Process Regulations.
Introduction
With a view to strengthening transparency, accountability, and the treatment of avoidance transactions in the Corporate Insolvency Resolution Process (“CIRP”), the Insolvency and Bankruptcy Board of India (“IBBI”) has, by its press release dated July 8, 2025, Press Release No. IBBI/PR/2025/15[1], notified changes to the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016 (“Regulations”) by notifying the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) (Fifth Amendment) Regulations, 2025[2] (“Amendment Regulations”).
The Amendment Regulations have come into effect from July 4, 2025. The amendments have been made to Regulation 36 and Regulation 38 of the Regulations, dealing with enhanced disclosure in the Information Memorandum (“IM”) and the treatment of avoidance transactions in resolution plans, respectively.
The key highlights of the Amendment Regulations are detailed below:
- Enhanced Disclosure and Periodical Updates to IM under Regulations
The Resolution Professional (“RP”) is now mandatorily required to include in the IM details of all identified avoidance transactions, if any, under Chapter III, as well as fraudulent or wrongful trading under Chapter VI of Part II of the Insolvency and Bankruptcy Code, 2016 (“Code”), along with subsequent filings before the Adjudicating Authority (“AA”) as referred to under Regulation 35A(3A). The RP is required to submit the IM in electronic form to each member of the Committee of Creditors (“CoC”) on or before the ninety-fifth day from the insolvency commencement date. In addition, the Amendment Regulations mandate that the RP must periodically update the IM to ensure that the CoC has access to the most accurate and up-to-date information throughout the CIRP.
2. Restriction on Assignment of Avoidance Transactions or Fraudulent or Wrongful Trading in Resolution Plans
The IBBI, through the Amendment Regulations, has introduced sub-regulation (2A) under Regulation 38, placing a significant restriction on the assignment of avoidance transactions or fraudulent or wrongful trading in resolution plans. A resolution plan shall not provide for the assignment of any avoidance transactions or fraudulent/wrongful trading claims under Chapter III or Chapter VI of Part II of the Code, unless such transactions have been both:
- Disclosed in the IM, and
- Intimated to all prospective resolution applicants in accordance with Regulation 35A(3A) before the last date for submission of resolution plans.
It is clarified that the restriction shall not apply to resolution plans already filed before the AA under Section 30(6) of the Code as of the date of commencement of the said Amendment Regulations.
Conclusion
The Amendment Regulations enhance transparency and fairness in the CIRP by mandating comprehensive disclosures and regulating the treatment of avoidance transactions. These changes aim to enable informed decision-making, improve price discovery, and maximise value for the corporate debtor’s assets.
Takeaways
- RP must disclose all identified avoidance and fraudulent/wrongful transactions in IM.
- The IM must be periodically updated for accurate, current disclosure to the CoC.
- Resolution plans cannot assign avoidance or fraudulent/wrongful trading claims unless disclosed in the IM and intimated to all resolution applicants prior to the last date for submission of resolution plans. This restriction does not apply to resolution plans submitted before July 4, 2025.
[1] IBBI Press Release No. IBBI/PR/2025/15 https://ibbi.gov.in/uploads/press/bbe147ded5923b021b8ecdff1c8f398e.pdf
[2]Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) (Fifth Amendment) Regulations, 2025 https://ibbi.gov.in//uploads/legalframwork/358ba97e0ecbfdf0c8b0f0b7ed899a74.pdf