Enhanced Beneficial Ownership Disclosures under IBC

To curb the misuse of the “clean slate” principle under Section 32A of the Insolvency and Bankruptcy Code, 2016 (IBC), and to ensure a genuine change in management and control, Regulation 38 of the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations has been amended. The amendment mandates every Prospective Resolution Applicant (PRA) to submit (i) a statement of beneficial ownership disclosing all natural persons who ultimately own or control the PRA, along with the shareholding structure and jurisdiction of each intermediate entity, and (ii) an affidavit affirming whether the PRA is eligible to avail the benefit of Section 32A.

Section 32A grants immunity to the corporate debtor and its property from prosecution for offences committed prior to the commencement of the Corporate Insolvency Resolution Process (CIRP), subject to the fulfilment of specified conditions—most notably, a bona fide change in management and control.

The amendment follows a discussion paper issued by the Board on August 6, 2025, titled “Measures to Enhance Integrity of the Corporate Insolvency Resolution Process (CIRP).” The paper highlighted persistent challenges in the effective implementation of Section 32A, particularly in cases involving complex, multi-layered ownership structures that obscure ultimate beneficial ownership.

Subsequently, on December 29, 2025, the formats for the Statement of Beneficial Ownership and the affidavit under Regulation 38(3A) of the CIRP Regulations were notified. These formats are modelled on the regulatory framework prescribed by the Reserve Bank of India under its Master Direction on Know Your Customer (KYC), thereby aligning the insolvency framework with broader financial-sector regulations. Listed entities have been exempted from furnishing granular shareholder details where adequate public disclosures are already available under the Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015, the Companies Act, 2013, or equivalent overseas regulatory regimes.

In Manish Kumar v. Union of India ((2021) 5 SCC 1), the Supreme Court upheld the constitutional validity of Section 32A, clarifying that statutory immunity attaches to the corporate debtor post-resolution but does not extend to erstwhile promoters or management. High Courts have since applied the provision strictly, including in Directorate of Enforcement v. JSW Steel Ltd. (2023 SCC OnLine Del 3268) and ED v. Dunar Foods Ltd. (2024 SCC OnLine Bom 1029), where prosecution and attachment proceedings against the corporate debtor were barred post-resolution, while actions against individuals were permitted to continue.

In addition to enhanced ownership disclosures, the IBBI has, through a notification issued earlier this month, directed Resolution Professionals to place detailed Section 29A compliance notes before the Committee of Creditors, reinforcing the objective that only eligible and credible resolution applicants participate in the CIRP.