IBBI’s Amendments to CIRP: A Step Towards Effective Resolution?

[Paridhi is a student at OP Jindal Global University.]

In May 2025, the Insolvency and Bankruptcy board of India (IBBI), introduced a series of amendments to the corporate insolvency resolution process (CIRP). These amendments are made by the IBBI by the powers conferred under Section 196 read with Section 240 that empower the IBBI to amend existing rules to enhance the insolvency framework in the country. The amendments, namely IBBI (Insolvency Resolution Process for Corporate Persons) (Third Amendment) Regulations 2025 and IBBI (Insolvency Resolution Process for Corporate Persons) (Fourth Amendment) Regulations 2025 are aimed at streamlining and strengthening the CIRP while simultaneously balancing the interests of everyone involved. 

The Third Amendment: A Step Towards Stricter Timelines

The third amendment is centered around Regulation 40B of the regulations that deals with filing of forms by the insolvency professional, interim resolution professional or resolution professional. The old regulations employed an event-driven methodology which obliged insolvency practitioners to submit specified forms within a week after particular events like public announcements, committee of creditors (CoC) formation, or approval of resolution plans. This resulted in fragmented reporting, where separate forms were created for every step (for instance, CRP-1 for commencement and CRP-6 for avoidance transactions). Unlike this, the 2025 amendment makes consolidation as a single filing in five critical forms CP-1 to CP-5, which are issued on the basis of CIRP stages pre-CoC, post-CoC, and liquidation phase and also introduces monthly reporting for the last form. Deadlines are aligned with calendar months now (e.g., CP-1 by the 10th of the month after the deadline), reducing burden of ad hoc submissions. This automates compliance, eliminates redundancy, and improves the structured process of monitoring the insolvency progress.

Furthermore, under the old system, missed deadlines, such as delayed public announcements, required filing CRP-7 every 30 days until the issue was fixed. There were no financial penalties; only possible disciplinary action. The new rules introduce a INR 500 monthly late fee for each form, creating a direct financial penalty for delays. Moreover, the amendment directly ties non-compliance, such as incomplete filings, inaccuracies, or delays, to regulatory consequences. This could include refusal to issue or renew an insolvency professional’s authorization for assignment. This change increases accountability and ensures that professionals prioritize timely and accurate reporting. The stricter rules support the IBC's goal of efficient resolutions by deterring negligence and procedural mistakes.

The Fourth Amendment: A Step Towards Transparency and Efficiency

While the third amendment was predominantly focused on tightening the regulatory regime of the CIRP, the fourth amendment is focused on rights of various stakeholders involved in the process while enhancing flexibility as well. The fourth amendment changes the contours of Regulations 18, 36A, 38 and 39. 

The amendment to Regulation 18 has introduced an important change by allowing interim finance providers to attend CoC meetings as non-voting observers. This change improves transparency for stakeholders who offer crucial liquidity during the insolvency process. By giving interim financiers a chance to see discussions without voting rights, the amendment balances inclusivity and creditor control. This could lead to more interim funding, as financiers gain confidence from real-time updates on how assets are used and repayment priorities. However, it keeps voting rights for financial creditors intact, ensuring that decision-making authority remains steady while addressing concerns about unequal access to information among key stakeholders.

Under Regulation 36A the amendment broadens resolution plans by allowing asset-wise or hybrid bids in addition to traditional whole-company proposals. This flexibility lets resolution professionals customize strategies, like selling non-core assets separately. This approach may draw in specialized buyers and increase recovery value. For creditors, this means a better chance of competitive bidding and improved returns. The change also fits with global insolvency practices, where selling parts of assets is common. However, it requires careful coordination to ensure fair valuation and prevent the fragmentation of viable businesses. Overall, this update modernizes the bidding process while keeping creditor oversight through CoC approval. 

The amendment to Regulation 38 has introduced a requirement of pro-rata priority for dissenting financial creditors in staged payment plans. This ensures they get paid before consenting creditors at each stage. It addresses worries about unfair plans that prioritize certain creditors. By establishing the rights of dissenters, the amendment lowers the chances of legal disputes and promotes fairness. However, it might make plan structuring more complex. Resolution applicants now need to create payment schedules that follow this new order. Creditors receive better protections, but this may mean fewer flexible repayment options. Overall, this change strengthens the IBC focus on protecting creditors and encourages fair outcomes.

Lastly, in Sub-Regulation 2 of Regulation 39 The words "which comply with the requirements of the IBC and regulations made thereunder" have been deleted. This deletion transforms the evaluation process inasmuch as resolution professionals must now present all submitted plans to creditors regardless of technical compliance, while simultaneously disclosing any avoidance transactions. The amendment's impact is twofold: it empowers creditors with complete information to make informed comparisons, while potentially increasing their workload to assess borderline cases. By shifting compliance verification to post-submission review, the change prioritizes commercial viability over procedural perfection, though final approval still requires compliance with the IBC. This balances flexibility with accountability in plan evaluation.

Alignment with Global Best Practices

The IBBI’s 2025 amendments align closely with UNCITRAL’s Model Law and the UK’s Insolvency Rule 2016 adopting globally recognized best practices. The third amendment’s strict filing deadlines are in line with the documentation requirements under Chapter 9 of the UK insolvency rules that requiring structured reporting. This also ensures that in case of cross border insolvency disputes, the parties follow strict filing requirements that ultimately ensure the sanctity of the overall proceedings. Furthermore, in regards to the fourth amendment, the amendment allows for pro rata payment largely aligns with the model law’s vision to that dissenting creditors should receive treatment "not less favorable" than what they would get in liquidation, implicitly supporting pro-rata fairness. In totality, taken together the regulations reflect an approach that is espoused in the UNCITAL Model Law recommendation that calls for an insolvency process which is characterized by efficient, timely and impartial manner of resolution. 

Conclusion 

The IBBI’s 2025 amendments significantly improve India’s insolvency framework by making it more aligned with global best practices. This change directly benefits investors. The streamlined reporting and strict deadlines under the third amendment cut down delays, ensuring quicker resolutions and better predictability. The fourth amendment provides pro-rata protection for dissenting creditors, based on UNCITRAL and the UK principles. This protection safeguards minority interests while increasing confidence in fair treatment. Flexible asset sales and interim financier rights resemble the practices in the US and the UK, attracting specialized investors and increasing recovery rates. Together, these reforms create a more transparent, efficient, and investor-friendly environment. This positions India as a competitive spot for distressed asset investments while reducing risks and maximizing returns.