India’s Insolvency Regulator Introduces Amendment to Corporate Bankruptcy Regulations

The Insolvency and Bankruptcy Board of India (IBBI) has amended its corporate insolvency resolution process and introduced fresh guidelines for appointing insolvency professionals, with a strong emphasis on transparency and fairness for stakeholders.

In May 2025, the Insolvency and Bankruptcy Board of India (IBBI) implemented two significant policy reforms aimed at enhancing the effectiveness of the corporate insolvency framework. These include amendments to the Corporate Insolvency Resolution Process (CIRP) under the Insolvency and Bankruptcy Code (IBC), 2016, as well as the introduction of new guidelines for the recommendation of insolvency professionals (IPs) to adjudicating authorities.

The two instruments—the IBBI (Insolvency Resolution Process for Corporate Persons) (Fourth Amendment) Regulations, 2025, and the Insolvency Professionals to Act as Interim Resolution Professionals, Liquidators, Resolution Professionals, and Bankruptcy Trustees (Recommendation) Guidelines, 2025—are structured to improve procedural transparency, expedite resolution timelines, and safeguard the interests of all stakeholders involved in the insolvency process.

Enhancing participation and flexibility in the resolution process

The Fourth Amendment to the Insolvency Resolution Process for Corporate Persons, effective May 26, 2025, brings key reforms that enhance stakeholder engagement, increase flexibility in structuring resolution plans, and ensure fair treatment of creditors.

One major reform allows the Committee of Creditors (CoC) to invite interim finance providers as observers to its meetings. The newly added Regulation 18(5) enables the CoC to include these providers in discussions, even though they lack voting rights. This measure promotes transparency and trust, keeping financiers informed and aligned with the resolution process—potentially encouraging more capital flow into distressed companies.

Another important change, introduced through sub-regulation (1A) under Regulation 36A, empowers resolution professionals to seek Expressions of Interest (EoIs) not just for the company as a whole, but also for individual assets or business divisions—if the CoC approves. This flexible, dual-track approach opens up opportunities for bidders interested in specific segments, increases competition, and helps prevent the unnecessary liquidation of valuable business units.

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To reinforce fairness in financial recovery, an amendment to Regulation 38 now mandates that financial creditors who dissent from the approved resolution plan be paid before those who consent, in proportion to their claims. This change strengthens creditor protection and upholds the principle of equitable treatment.

New guidelines for appointing insolvency professionals

To support recent regulatory changes, the IBBI has introduced new guidelines for appointing insolvency professionals (IPs) for the period from July 1 to December 31, 2025. Titled Insolvency Professionals to Act as Interim Resolution Professionals, Liquidators, Resolution Professionals, and Bankruptcy Trustees (Recommendation) Guidelines, 2025, these rules streamline appointments made by the National Company Law Tribunal (NCLT) and Debt Recovery Tribunal (DRT).

Under these guidelines, the IBBI will create a zone-wise and bench-wise panel of eligible IPs to expedite the appointment process. To qualify, professionals must submit an expression of interest (Form A) by June 22, 2025, and hold a valid Authorization for Assignment (AFA) through December 31, 2025. They must also confirm that they have not been convicted in the past three years and that no disciplinary proceedings are pending against them. These conditions ensure the selection of capable and trustworthy professionals for critical insolvency roles.

The guidelines differentiate between individual IPs and Insolvency Professional Entities (IPEs). Individual IPs may be empaneled only in their designated zones, while IPEs can appear on panels across all NCLT benches. Although appointments will generally follow alphabetical order, tribunals may select professionals outside the panel if justified.

To reinforce accountability, the guidelines also introduce penalties. If a listed IP refuses an assignment without valid reasons, they will be removed from the panel for six months.

Impact on investors, insolvency professionals, and corporates in India

The latest reforms—both the panel guidelines and the CIRP amendments—aim to improve transparency, strengthen creditor rights, and professionalize the resolution process.

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For investors, the changes may enhance recovery outcomes and reduce delays in implementing resolution plans. Insolvency professionals and their firms in India must now comply with new eligibility and disclosure requirements. Corporates undergoing insolvency should adapt their strategies to align with the revised panel and bidding frameworks, while legal advisors can play a key role in ensuring compliance and optimizing resolution outcomes.

Conclusion

By enhancing the appointment process of insolvency professionals, improving transparency in creditor payments, and allowing for flexible resolution structuring, India aims to make insolvency resolution more predictable and investor-friendly. For financial institutions, corporate debtors, and insolvency professionals alike, the next step is ensuring operational readiness to comply with and benefit from these updated regulations.

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