Alterations to Insolvency and Bankruptcy Code (IBC) streamline the process for submitting insolvency applications and restructure liquidation proceedings for quicker resolution
New Insolvency and Bankruptcy Code Amendments Streamline and Expedite Insolvency Processes
The Indian government has introduced significant amendments to the Insolvency and Bankruptcy Code (IBC) through the 2025 Amendment Bill, aimed at enhancing creditor-friendly, transparent, and globally aligned insolvency procedures.
Creditor-Initiated Insolvency Resolution Process (CIIRP)
A new out-of-court, creditor-initiated insolvency resolution mechanism, introduced under Chapter IV-A (Sections 58A to 58K), aims to facilitate a faster, more cost-effective resolution with minimal disruption to business operations. The process balances creditor rights with debtor protections and involves clear eligibility criteria, defined timelines, and procedural safeguards.
Domestic Group Insolvency
A new voluntary group insolvency framework, established under Chapter V-A, addresses the interconnected financial position of group entities. This coordinated resolution approach is intended to reduce fragmented proceedings, minimize value erosion, and maximize collective value for creditors across the group companies.
Cross-Border Insolvency
The Bill introduces a basic framework for cross-border insolvency, aligning India’s insolvency regime with international best practices. This framework facilitates the protection of stakeholder interests in foreign and domestic proceedings, improves creditor access to overseas assets, and boosts investor confidence by providing clarity and cooperation mechanisms for insolvency cases spanning jurisdictions.
Expeditious Admission, Resolution, and Liquidation
Several provisions are aimed at reducing delays and streamlining processes:
- Mandatory NCLT timelines require insolvency cases to be admitted within 14 days and resolution plans approved within 30 days.
- The NCLT can restore the Corporate Insolvency Resolution Process (CIRP) once in exceptional cases if a resolution plan is not approved or rejected, enabling a second opportunity to salvage value.
- The introduction of pre-packaged insolvency enables faster hybrid restructuring plans for larger firms, allowing resolution plans to be negotiated and agreed before formal insolvency proceedings, reducing value erosion and litigation.
Additional Enhancements
- The Bill excludes related-party debt from voting rights in the Committee of Creditors (CoC) to ensure fair, unbiased decision-making.
- Expands the definition of service providers in insolvency to regulate a wider range of professionals involved in the process.
- Reinforces the clean slate principle, making sure that once a resolution plan is approved, previous claims against the debtor are extinguished to provide finality and certainty.
The amendments also propose decriminalisation of certain actions, empower the Central Government to resolve any implementation difficulties consistently with the IBC, and mandate the use of an electronic portal to enhance efficiency and transparency.
Moratorium and Liquidation
The moratorium available under the Corporate Insolvency Resolution Process (CIRP) is extended to the liquidation process to speed up company dissolution. The committee of creditors can recommend direct dissolution if assets are negligible, and can retain or appoint the Resolution Professional as liquidator.
Personal Guarantor Misuse and Institutional Capacity
The reforms aim to address personal guarantor misuse and enhance institutional capacity. The bill mandates that insolvency applications be admitted within 14 days, currently taking an average of over 434 days.
Approval of the Resolution Plan
The approval of the resolution plan is being segmented into two parts: implementation and distribution, prioritizing speedy resolution of the distressed entity over inter-creditor disputes.
Regulation of the IBC Fund and IBBI's Scope
The Central Government can regulate the use of the IBC Fund and expand IBBI's regulatory scope.
Adjudicating Authority's Power
Limiting the adjudicating power of the National Company Law Tribunal (NCLT) to admit or reject the application inter alia basis default will provide the necessary impetus for timely outcomes.
The bill was introduced by Finance & Corporate Affairs Minister Nirmala Sitharaman in the Lok Sabha and referred to the Select Committee. The bill was published on August 13, 2025.
According to Siddharth Srivastava, Partner, Restructuring & Insolvency, Khaitan & Co, limiting the adjudicating power of NCLT will help achieve timely outcomes at the first stage itself.
The amendments incorporate new concepts such as creditor-initiated insolvency resolution process (CIIRP), domestic group insolvency, and cross-border insolvency, aiming to make the insolvency regime faster, more transparent, and aligned with global standards, addressing long-standing issues such as delays, valuation erosion, fragmented group proceedings, and cross-border complexities.
- The new Creditor-Initiated Insolvency Resolution Process (CIIRP) under Chapter IV-A allows for a faster resolution of business insolvency cases, balancing creditor rights with debtor protections.
- The amended insolvency regime introduces a cross-border insolvency framework, enabling the protection of stakeholder interests in both foreign and domestic proceedings, and enhancing investor confidence.
- With the adoption of pre-packaged insolvency, larger firms can negotiate and agree on hybrid restructuring plans before formal insolvency proceedings, reducing value erosion and litigation.
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