IBBI Amends CIRP Regulations: Enhancing Transparency in Insolvency Proceedings

Introduction

The IBBI has recently enacted significant amendments to the IBBI¹ (Insolvency Resolution Process for Corporate Persons) Regulations, 2016 (CIRP Regulations) via Press Release No.IBBI/2025-26/GN/REG128 These changes, effective July 4, 2025, primarily aim to improve the disclosure and treatment of avoidance transactions, as well as fraudulent or wrongful trading, throughout the CIRP². The amendments, introduced as the IBBI (Insolvency Resolution Process for Corporate Persons) (Fifth Amendment) Regulations, 2025, are a direct response to identified deficiencies in the previous regulatory framework.

Previously, the regulatory framework did not explicitly mandate the comprehensive disclosure of identified avoidance transactions in the Information Memorandum (IM) or its updates. This omission meant that prospective resolution applicants often lacked full information regarding avoidance transactions before submitting their plans, leading to reduced transparency and an imbalance of information. To address these issues, the IBBI issued a discussion paper on February 4, 2025, inviting public comments on how avoidance transactions should be treated and disclosed during the corporate insolvency resolution process.

Key Amendments to CIRP Regulations

1. Enhanced disclosure in IM – The Resolution Professional  shall mandatorily include in the Information Memorandum (IM) details of all identified avoidance transactions or fraudulent or wrongful trading. Further, the RP is required to keep the IM updated and provide the same to the CoC³ periodically.

2. Treatment of disclosed transactions in Resolution Plan: – The resolution plan shall not provide for assignment of any avoidance transactions or fraudulent or wrongful trading unless it was: (a) disclosed in the information memorandum; and (b) intimated to all prospective resolution applicants under sub-regulation (3A) of regulation 35A before the last date for submission of resolution plans.

Takeaways

These amendments mandate that resolution applicants adhere to the disclosure of identified avoidance transactions and fraudulent or wrongful trading in the IM and its subsequent updates. This requirement ensures that these transactions are treated correctly within the resolution plan. The amendments aim to enhance transparency and ensure that resolution plans are based on complete and accurate information, thereby enabling resolution applicants to incorporate appropriate strategies for dealing with such transactions.

Conclusion

The recent amendments to the CIRP Regulations by the IBBI mark a significant step towards reinforcing the integrity and effectiveness of India’s insolvency framework. By mandating comprehensive disclosure of avoidance transactions and fraudulent trading, the IBBI aims to foster greater transparency and ensure that all stakeholders, particularly prospective resolution applicants, operate with complete and accurate information. These proactive measures are set to streamline the resolution process, reduce information asymmetry, and ultimately lead to more robust and equitable outcomes in corporate insolvency cases, thereby strengthening trust in the judicial functioning.

Citations

1. Insolvency and Bankruptcy Board of India 
2. Corporate Insolvency Resolution Process
3. Committee of Creditors

Expositor(s):  Adv. Archana Shukla