Revamping Corporate Insolvency: IBBI’s Fourth Amendment Regulations, 2025

In a significant regulatory development, the Insolvency and Bankruptcy Board of India (IBBI) has notified the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) (Fourth Amendment) Regulations, 2025, introducing a suite of progressive reforms aimed at streamlining and strengthening India’s corporate insolvency resolution framework under the Insolvency and Bankruptcy Code, 2016 (IBC).

The amendment regulations, which came into effect immediately upon notification on May 26, 2025, are expected to significantly improve procedural clarity, creditor protection, and overall resolution efficiency.

Key Amendments and Legal Implications

• Flexibility in Resolution Plan Structure: The amended regulations empower resolution professionals (RPs), with the approval of the Committee of Creditors (CoC), to invite expressions of interest for resolution plans in three formats:
  1. For the corporate debtor as a whole;
  2. For the sale of one or more of its assets;
  3. Or a combination of both.

This mechanism is aimed at facilitating partwise or hybrid resolution approaches, potentially improving outcomes in complex cases, minimizing delays, protecting the value of viable business units, and encouraging more targeted investor interest.

• Empowering Interim Finance Providers: A new provision allows the CoC to direct the RP to invite providers of interim finance to attend CoC meetings as observers (without voting rights). This move ensures that lenders offering crucial short-term funding during CIRP are better informed and can assess the debtor’s situation more accurately, thereby facilitating smoother financial decision-making.
• Prioritized and Pro Rata Payment to Dissenting Financial Creditors: To ensure equitable treatment of financial creditors, the amendment provides that dissenting creditors (those who did not vote in favor of the plan) must be paid at least pro rata and in priority over consenting creditors during phased payment implementation. This balances the rights of dissenting creditors with the commercial realities of staged resolution plans.
• Mandatory Presentation of All Plans to CoC: Regulation 39(2) has been revised to mandate the RP to place all resolution plans received, including non-compliant plans, before the CoC, with relevant details. By:
  1. Omitting the earlier requirement that “only plans which comply with the requirements of the Code and regulations: be considered, and
  2. Inserting a specific reference to “non-compliant plans,” the amendment ensures transparency and allows the CoC to assess all proposals on record, potentially uncovering merit even in formally deficient submissions. This step enhances information symmetry and encourages better decision-making.

With these reforms, the IBBI continues its drive toward aligning India’s insolvency ecosystem with global best practices. The amendments are expected to:

• Improve creditor confidence;
• Enable more adaptable restructuring solutions;
• Enhance transparency and compliance; and
• Promote faster and fairer resolution outcomes.

These steps reflect India’s sustained efforts to build a robust insolvency resolution mechanism that supports distressed asset recovery, encourages timely resolution, and protects the rights of all stakeholders.