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IBBI Tightens CIRP Regulations Through Fifth Amendment
On July 4, 2025, the Insolvency and Bankruptcy Board of India (IBBI) notified the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) (Fifth Amendment) Regulations, 2025, to the Insolvency Resolution Process for Corporate Persons (CIRP) Regulations, 2016, vide Notification bearing Reference No. F. No. IBBI/2025-26/GN/REG128. The amendment, which comes into immediate effect, introduces key changes to Regulations 36 and 38 of the CIRP Regulations, 2016, primarily focused on strengthening disclosure norms and regulating the treatment of avoidance transactions and fraudulent or wrongful trading in the corporate insolvency resolution process.
The overarching intent is to ensure that the Committee of Creditors (CoC) and prospective resolution applicants are furnished with a complete and updated picture of the corporate debtor’s affairs, particularly concerning transactions that may have the effect of siphoning assets or harming creditor interests.
In practice, it has often been observed that crucial information, particularly relating to avoidance transactions such as preferential, undervalued, fraudulent or wrongful trading, was disclosed only after the submission of resolution plans. Such delayed disclosures compromised the fairness of the process, placing resolution applicants at an informational disadvantage and exposing them to unanticipated legal and financial risks post-approval.
Recognising the need to codify safeguards against such procedural inefficiencies, the IBBI has now mandated early, complete, and ongoing disclosure of such transactions. In parallel, the regulations restrict how and when avoidance transactions may be assigned in a resolution plan, creating a more balanced and predictable process for all stakeholders.
Key Amendments: Strengthening the Regulatory Spine
- Enhanced Disclosure Obligations under Regulation 36: The amendment mandates that the Information Memorandum (IM) must now include:
- Details of all identified avoidance transactions under Chapter III or instances of fraudulent or wrongful trading under Chapter VI of Part II of the Code.
- Any subsequent filings made before the Adjudicating Authority under Regulation 35A(3A).
Additionally, the amendment introduces the requirement to include “subsequent updates” in the IM, thereby reinforcing the dynamic nature of the disclosure obligation and promoting timely and ongoing transparency throughout the insolvency process.
2. Restriction on Assignment of Avoidance Transactions under Regulation 38: A new sub-regulation, 38(2A), has been introduced to restrict the assignment of avoidance transactions or instances of fraudulent/wrongful trading in resolution plans unless:
- The transactions are explicitly disclosed in the IM, and
- They are communicated to all prospective resolution applicants under sub-regulation (3A) of regulation 35A before the last date for submission of resolution plans.
Additionally, the amendment exempts resolution plans already submitted to the Adjudicating Authority prior to the effective date, providing transitional relief for plans in advanced stages, i.e., plans submitted under section 30(6) to the Adjudicating Authority on or before the date of commencement of this amendment.
This ensures a level playing field for all applicants, fosters transparency, and helps mitigate legal and commercial uncertainties associated with undisclosed liabilities.
These changes are expected to have far-reaching implications for ongoing and future insolvency proceedings:
- PRAs and CoC members can better evaluate legal exposures and asset values, fostering more informed and realistic resolution strategies.
- Timely disclosures help avoid post-submission surprises, preserving the fairness and credibility of the CIRP.
- The conditions tied to assigning avoidance transactions discourage last-minute disclosures and promote procedural discipline.
- A more robust, transparent regime can boost investor confidence and contribute to improved price discovery and value maximization.
The Fifth Amendment reflects IBBI’s continued commitment to refining and fortifying the insolvency resolution framework in India. These reforms are poised to empower stakeholders particularly CoC members and resolution applicants, to make better-informed decisions, improve price discovery, and safeguard the integrity of the resolution process. As India’s insolvency regime continues to mature, such targeted and timely interventions will play a crucial role in building trust, enhancing predictability, and promoting efficient outcomes across the insolvency landscape.
