IBBI DISCUSSION PAPER: PROPOSALS TO STRENGTHEN INTEGRITY, DISCLOSURE, AND DIGITALIZATION IN THE CORPORATE INSOLVENCY RESOLUTION PROCESS (CIRP)

The Insolvency and Bankruptcy Board of India (IBBI/Board) released a Discussion Paper dated August 6, 2025, setting out key regulatory proposals aimed at strengthening institutional safeguards, improving procedural clarity, and harmonizing key processes under the Corporate Insolvency Resolution Process (CIRP) and liquidation.

1. Formalizing Committee of Creditors (CoC) Deliberation on Resolution Applicant (RA) Eligibility (Section 29A)

Currently, while the Resolution Professional (RP) and the Resolution Applicant (RA) have various compliance obligations regarding Section 29A eligibility (including affidavits, due diligence, and confirmation in Form H) under the Insolvency and Bankruptcy Code, 2016 (Code), there is no specific provision requiring the Committee of Creditors (CoC) to formally record its deliberations on this aspect. Although it is implied that the CoC ensures eligibility while exercising its commercial wisdom, an express duty will enhance transparency and accountability.

• • • Proposed Solution: It is proposed to amend the CIRP Regulations to explicitly mandate the CoC to deliberate on the eligibility of the resolution applicant under section 29A of the Code, including the due-diligence report submitted by the RP, the RA’s affidavit, and other information provided in the resolution plan, before voting on the plan.

• • • Expected Benefits: This practice is expected to strengthen the process by encouraging CoC members to engage more deeply in due diligence, including seeking clarifications from the RP or RA. Furthermore, an explicit record of deliberation is anticipated to reduce potential litigation on eligibility-related issues and uphold the legislative intent of promoting fair and lawful participation. The RP shall be responsible for recording these deliberations in the minutes of the meeting.

2. Enhanced Disclosures in Resolution Plans Regarding Immunity under Section 32A

Section 32A grants immunity to the Corporate Debtor (CD) and its property from prosecution for pre-CIRP offenses, provided the approved resolution plan results in a change in management/control to a non-ineligible person.

• • • Statement of Problem: Effective implementation of Section 32A faces challenges when prospective resolution applicants (PRAs) use complex, multilayered ownership structures, obscuring the ultimate beneficial owners. The absence of adequate disclosure makes it difficult to establish the identity of potential beneficiaries under Section 32A, thereby undermining the spirit of the law and the clean slate principle.

• • • Proposed Solution: It is proposed to amend Regulation 38 to mandate every PRA to file, as part of the resolution plan, the following enhanced disclosures:

• • • • • A statement of beneficial ownership, in a Board-specified format, covering details of all natural persons who ultimately own or control the PRA, alongside the shareholding structure and jurisdiction of each intermediate entity.

• • • • • An affidavit, in a Board-specified format, stating whether the PRA is eligible or not eligible for the benefit of section 32A.

• • • Expected Benefits: This disclosure requirement will enable the RP and CoC to establish the identity of potential beneficiaries, foster informed and transparent decision-making, and deter ineligible or conflicted bidders, thus enhancing the integrity of the resolution process.

3. Invitation and Submission of Resolution Plans Through an Electronic Platform

The IBBI has already mandated the exclusive use of a specified online auction platform for conducting auctions during liquidation processes, effective since April 1, 2025, demonstrating the success of digitalization in the IBC framework.

• • Justification: The success in liquidation processes presents a compelling case for extending technological solutions to other insolvency proceedings. Parliamentary Committees, such as the Standing Committee on Finance, have recommended that the Ministry of Corporate Affairs (MCA) implement a direct submission system for resolution plans through a central online portal to ensure the confidentiality of sensitive information. The IIIPI Study Group also noted that resolution proposals should be listed on the eBkray portal to remove information asymmetry.

• • Proposed Solution: It is proposed to amend the CIRP Regulations to empower the Board to notify an online portal for activities related to the invitation and submission of resolution plans.

• • Proposed Draft Regulation: The draft proposes inserting Regulation 36AA, stating that the Board may, by circular and with effect from a specified date, mandate that any activity, in relation to invitation and submission of resolution plans, shall be carried out exclusively through an electronic platform recognized by the Board. This aims to maintain fairness, transparency, and efficiency in the resolution framework while ensuring confidentiality.

The IBBI’s proposals mark a timely and strategic upgrade to India’s insolvency framework. By formalizing CoC scrutiny under Section 29A, mandating beneficial ownership disclosures, and digitizing resolution plan submissions, they enhance transparency, curb misuse, and align with global best practices. These reforms promise reduced litigation, greater accountability, and stronger stakeholder confidence in the resolution process.