Corporate Insolvency Regime Redesign through CIRP Reforms by IBBI: Examining the Evolving Bankruptcy Landscape in India
The Indian government's latest insolvency reforms, embodied in the Fourth Amendment to the IBBI (Insolvency Resolution Process for Corporate Persons) Regulations, 2025, aim to streamline and modernise the insolvency resolution process, making it faster, more flexible, investor-friendly, and accountable while addressing structural inefficiencies in the corporate insolvency regime.
Key changes and their implications include:
**1. Inviting Interim Finance Providers as Non-Voting Observers in Committee of Creditors (CoC) Meetings**
The new regulations allow interim finance providers, who supply essential short-term funds to keep the corporate debtor as a going concern, to attend CoC meetings as non-voting observers. This acknowledges their crucial role and enhances transparency and inclusivity without diluting the voting power of financial creditors. The reform aims to better protect interim financiers’ interests, which historically were secondary, thereby encouraging more supportive and timely interim funding.
**2. Modular (Part-Wise) Resolution**
The regulations now permit Resolution Professionals, with CoC approval, to invite resolution plans for the entire corporate debtor or for sale of one or more assets or business segments. This "modular resolution" approach addresses the issue of value erosion in viable segments of the corporate debtor by allowing partial asset sales, enhancing overall value maximization. It encourages broader investment participation by enabling interested parties to bid for specific assets rather than the whole company, boosting competition and recovery prospects.
**3. Priority Payments to Dissenting Financial Creditors**
The reforms harmonise payment timelines to dissenting financial creditors, ensuring they receive prioritized payments. This change aims to safeguard the interests of creditors who do not vote in favour of the resolution plan but are entitled to payments, thus strengthening the fairness and predictability of the insolvency process. Such provisions help maintain creditor confidence and encourage quicker resolution agreements.
The changes stem from the recognition that the initial IBC framework, while successful at reducing non-performing assets and expediting resolutions, needed refinements to overcome delays, underutilization of assets, and limited investor engagement. By introducing procedural clarity, stakeholder participation, and value maximization mechanisms, the IBBI aims to enhance both the efficiency and effectiveness of the Corporate Insolvency Resolution Process (CIRP).
Ultimately, the reforms seek to strengthen India’s ease of doing business, improve recovery outcomes for creditors, and make insolvency resolution a more transparent, accountable, and economically rational process. The amendment acknowledges that financial creditors who opposed a plan (but whose vote was overridden) should not be forced to take deeper haircuts than those who agreed to it. The guidelines penalise unjustified refusal of insolvency appointments by IPs, leading to a six-month debarment from panel listings. The new guidelines govern the formation of a panel of insolvency professionals (IPs) in advance, which is required to be shared with the adjudicating authority. A robust grievance redressal mechanism will be necessary to balance accountability with fairness.
[1] Insolvency and Bankruptcy Board of India (IBBI) [2] The Economic Times [3] Livemint [4] Financial Express [5] Business Standard
In the context of the new insolvency reforms in India, the revised regulations invite interim finance providers to attend Committee of Creditors (CoC) meetings as non-voting observers, thereby acknowledging their crucial role and enhancing transparency in business finance.
The changes in the corporate insolvency regime also include a modular resolution approach, which allows Resolution Professionals to invite resolution plans for the sale of one or more assets or business segments, aiming to maximize value for corporate debtors and encourage participation from various business investors.
