IBBI Proposes Reforms to Strengthen Insolvency Governance

The Insolvency and Bankruptcy Board of India (IBBI) has released two notable discussion papers, namely, Minimum Shareholding Requirements for Directors and Partners of IPEs dated November 17, 2025, and Standardised Templates for Beneficial Ownership and Section 32A Affidavits dated November 6, 2025. Together, these papers propose substantive reforms intended to enhance governance discipline within Insolvency Professional Entities (IPEs) and improve the quality, uniformity, and reliability of disclosures in the Corporate Insolvency Resolution Process (CIRP).

To address long-standing disparities in ownership and control within IPEs, the discussion paper on Minimum Shareholding Requirements recommends introducing mandatory minimum equity or capital contribution thresholds for all directors and partners. Although the Insolvency Professionals Regulations, 2016 require that a majority of directors or partners be registered Insolvency Professionals (IPs), there is currently no minimum capital contribution requirement for individual members. IBBI’s analysis highlights that in IPEs with 10 or more members, 77% hold less than 5% equity, even though they collectively discharge over 70% of assignments as IRPs, RPs, or liquidators, raising concerns around token membership, concentration of control, and weakened accountability.

To realign ownership with responsibility, IBBI proposes:

• Mandatory minimum 5% shareholding/capital contribution by every director or partner.
• Pro-rata relaxation for IPEs with more than 20 members to maintain structural feasibility.

These measures are expected to foster greater financial participation by managerial members, promote balanced decision-making, enhance independence, and strengthen regulatory supervision. Public comments on the paper have been invited until December 7, 2025, following which amendments may be introduced under Section 196 of the Insolvency and Bankruptcy Code, 2016 (IBC).

In parallel, the discussion paper on Standardised Templates for Beneficial Ownership and Section 32A Affidavits seeks to streamline and harmonize key disclosures required from Prospective Resolution Applicants (PRAs). Currently, PRAs must furnish beneficial ownership details and an affidavit under Section 32A, but the absence of prescribed formats has led to inconsistent, incomplete, and difficult-to-verify submissions. This has caused delays in due diligence, fragmented disclosure of control structures, and avoidable complications before adjudicating authorities, issues previously flagged in IBBI’s August 2025 paper on enhancing CIRP integrity.

The proposed reforms introduce two uniform templates:

1. Beneficial Ownership Template: Aligned with the RBI KYC Master Direction, 2016, the template mandates identification of all natural persons holding more than 10% ownership or control, as well as comprehensive mapping of layered shareholding structures, including trustee and beneficiary information. It also provides limited relaxation for domestic and notified foreign listed entities where adequate shareholder information is already available through public filings.
2. Section 32A Affidavit Template: The standardised affidavit requires a clear declaration of the applicant’s eligibility under Section 32A(1), confirmation that no incoming management or controlling person is connected to past offences, and a factual justification demonstrating compliance with Sections 32A(1)(a) and 32A(1)(b). It further requires an affirmation that no proposed controller falls within any category of statutory ineligibility.

Stakeholder feedback on this paper is invited until November 16, 2025, after which amendments will be incorporated into the CIRP Regulations pursuant to Section 196 of the IBC.

Collectively, these proposals aim to recalibrate governance structures within IPEs, deepen transparency in resolution processes, and reinforce the integrity of India’s insolvency framework. By mandating meaningful economic stakeholding and standardising critical disclosures, the IBBI’s initiatives are poised to emerge as pivotal governance reforms under the Insolvency and Bankruptcy Code in the coming years.