IBBI Seeks To Boost Insolvency Resolution Process, Strengthen Safeguards

(The Corner Office Journal) -- The Insolvency and Bankruptcy Board of India (IBBI) issued a discussion paper outlining the measures with an aim to enhance integrity of the corporate insolvency resolution process (CIRP).

The key regulatory proposals are aimed at strengthening institutional safeguards, improving procedural clarity, and harmonizing key processes under CIRP and liquidation, the IBBI said in discussion paper.

The proposed measures are:

1. Recording of committee of creditors’ deliberation on resolution applicants’ eligibility under Section 29A of the Insolvency and Bankruptcy Code (IBC) 2016.

2. Enhanced disclosures in resolution plans regarding Section 32A.

3. Invitation and submission of resolution plans through an electronic platform.

Below are the key points from the IBBI’s proposals:

Recording Creditors’ Deliberation On Resolution Applicants’ Eligibility

=> The IBBI proposed the committee of creditors formally discuss and record its deliberation on Section 29A eligibility of the resolution applicant in the meetings, as this practice is likely to strengthen the insolvency resolution process in several respects.

=> The practice will encourage the committee of creditors’ members to engage more deeply in the due diligence process, including seeking additional information or clarification from the resolution professional, or the resolution applicant.

=> The framework will reduce potential litigation on eligibility-related issues under Section 29A and an explicit record of the deliberation would enhance transparency.

=> The deliberation with the committee of creditors would further uphold the legislative intent of the IBC by promoting fair and lawful participation in the resolution process.

=> The resolution professional and successful resolution applicant will be responsible to ensure compliance of Section 29A.

Proposed Solution

=> The IBBI plans to further amend the CIRP regulations to explicitly mandate the committee of creditors to deliberate on the eligibility of the resolution applicant under section 29A, the due-diligence report of the resolution professional, the affidavit of the resolution applicant.

=> The resolution professional will record the details of the deliberation in the minutes of the meeting.

Enhanced Disclosures In Resolution Plans Regarding Section 32A

=> The IBBI said the ultimate beneficiaries of the successful resolution applicant must be disclosed in advance to uphold the integrity of the CIRP and prevent any potential abuse.

=> The introduction of a disclosure requirement regarding beneficial ownership of the resolution applicant will enable the resolution professional and committee of creditors to establish the identity of such potential beneficiaries.

=> The move will also foster informed and transparent decision making, deter ineligible or conflicted bidders, and ultimately enhance the integrity of the resolution process.

Proposed Solution

=> The insolvency regulator proposed to amend Regulation 38 to mandate every prospective resolution applicant to file, as part of the plan, the following:

(a) a statement of beneficial-ownership, covering details of all natural persons who ultimately owns or controls the prospective resolution applicant, together with the shareholding structure and jurisdiction of each intermediate entity.

(b) an affidavit, stating that the prospective resolution applicant is eligible/not eligible for the benefit of Section 32A.

Resolution Plans Through Electronic Platform

=> The IBBI said there is a pressing need to digitalize the resolution plan receipt process to maintain fairness, transparency, and efficiency in the resolution framework while ensuring the confidentiality of sensitive commercial information.

Proposed Solution

=> The regulator proposed to amend the CIRP regulations to empower the IBBI to notify an online portal for activities related to invitation and submission of resolution plans.

=> The move is likely to extend the digitalization benefits currently realized in liquidation processes to the broader resolution framework.

The board is seeking public comments on the proposals and the draft regulations by 27 August 2025.

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