The Insolvency and Bankruptcy Board of India (IBBI) has implemented two significant policy reforms to enhance the effectiveness of the corporate insolvency framework in India. These include the Fourth Amendment to the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016 and the introduction of new guidelines for recommendation of Insolvency Professionals (IPs) to act as Interim Resolution Professionals, Liquidators, Resolution Professionals and Bankruptcy Trustees to Adjudicating Authority.
The amendments introduce notable procedural and substantive changes to enhance transparency, participation, and fairness in the resolution process and have been brought into force from May 26, 2025. The two instruments are also structured to improve procedural transparency, accelerate resolution timelines, and safeguard the interests of all stakeholders involved in the insolvency process.
Key Amendments Introduced to IBBI (Insolvency Resolution Process for Corporate Persons) Regulations, 2016
- Inclusion of Interim Finance Providers as Observers
The Committee of Creditors (CoC) is now empowered to invite providers of interim finance to attend CoC meetings as observers. These observers will not have voting rights.
- Flexibility in Inviting Resolution Plans
With CoC approval, the Resolution Professional (RP) may now invite Expressions of Interest for the corporate debtor as a whole, or for the sale of one or more assets of the corporate debtor, or both. It will prevent value erosion in viable segments and encourage broader investment participation while facilitating a more flexible and realistic resolution approach, especially in cases where asset-wise sales could maximize value.
- Priority in Payment for Dissenting Financial Creditors
The amendment has added a new proviso to regulation 38(1)(b) and has mandated a priority in payment for dissenting financial creditors. It mandates that where a resolution plan provides for payment in stages, the financial creditors who did not vote in favour of the resolution plan shall be paid at least pro rata and in priority over financial creditors who voted in favour of the plan in each stage. This approach balances the legitimate rights of dissenting creditors with the practical constraints of phased implementations.
- Presentation of all plans before the Committee of Creditors
The Resolution professionals are now required to present all resolution plans received, including those that are non-compliant, along with relevant details to the CoC. This provision ensures that the CoC has access to comprehensive information for decision-making, which may lead to more informed choices and ultimately contribute to a more transparent and effective resolution process.
Further, to support the above changes, the IBBI vide Circular No. IBBI/CIRP/85/2025, dated May 26, 2025, has launched revised forms for Corporate Insolvency Resolution Process. Under this, the existing nine forms (consisting of Form IP-1 and CIRP Forms 1 to 8) are consolidated into five forms (CP-1 to CP-5). This consolidation is done by removing duplications, streamlining data requirements, and leveraging technology to auto-populate information already available on the portal.
New Guidelines for Appointing Insolvency Professionals
Another significant step by IBBI is introduced via the guidelines for appointing insolvency professionals (IPs) for the period from July 1 to December 31, 2025, titled Insolvency Professionals to Act as Interim Resolution Professionals, Liquidators, Resolution Professionals, and Bankruptcy Trustees (Recommendation) Guidelines, 2025. The guidelines streamline the appointments made by the National Company Law Tribunal (NCLT) and Debt Recovery Tribunal (DRT).
Under these guidelines, the IBBI will create a zone-wise and bench-wise panel of eligible IPs to expedite the appointment process. To qualify, the professionals must submit an expression of interest by June 22, 2025, and hold a valid Authorization for Assignment through December 31, 2025. They must also confirm that they have not been convicted in the past three years and that no disciplinary proceedings are pending against them. These conditions will ensure the selection of capable and trustworthy professionals for insolvency roles.
The guidelines differentiate between individual IPs and Insolvency Professional Entities (IPEs). Individual IPs may be empanelled only in their designated zones, while IPEs can appear on panels across all NCLT benches. Although appointments will generally follow alphabetical order, tribunals may select professionals outside the panel if justified.
To ensure accountability, the guidelines have also introduced penalties. If a listed IP refuses an assignment without valid reasons, they will be removed from the panel for six months.
Conclusion
The Fourth Amendment of 2025 reflects IBBI’s continued efforts to refine the CIRP framework, promoting value maximisation, procedural clarity, and stakeholder protection. Also, by enhancing the appointment process of insolvency professionals, IBBI aims to make insolvency resolution more predictable and investor-friendly. However, ultimately, to reap the benefits of these amended legislation and new guidelines, the next step is for insolvency experts, corporate debtors, and financial institutions to ensure their operational readiness to comply with and adhere to the new regulations.
Authors: Manisha Singh and Nisha Sharma
First Published by: Mondaq here