IBBI issues discussion paper proposing amendments to CIRP, liquidation and personal guarantor regulations

Key Highlights of the Discussion Paper: 

1. Greater Committee Oversight in Appointment of Registered Valuers: The discussion paper proposes requiring prior approval of the Committee of Creditors (CoC) before appointment of registered valuers by the resolution professional (RP). The proposal is intended to align valuation exercises more closely with creditor oversight, given the central role of valuation in evaluating resolution plans.

2. Time-Bound Submission and Enhanced Confidentiality of Valuation Reports: IBBI has proposed a structured framework for valuation reports. Registered valuers would be required to submit valuation reports, including fair value and liquidation value, on or before the last date for receipt of resolution plans. Such reports are proposed to be submitted through sealed covers or secure electronic modes with restricted access. The reports would only be opened before the CoC after receipt of confidentiality undertakings from its members.

3. Removal of Fair Value Disclosure from Information Memorandum: To strengthen confidentiality safeguards, IBBI proposes deletion of the requirement to disclose fair value in the Information Memorandum. Instead, valuation reports are proposed to remain confidential until the resolution plan evaluation stage. The proposal seeks to address perceived inconsistencies in the existing confidentiality framework governing valuations.

4. Clarification on Cessation of Interim Moratorium for Personal Guarantors: Following the amendments introduced through the Insolvency and Bankruptcy Code (Amendment) Act, 2026, which removed interim moratorium protection for personal guarantors to corporate debtors with effect from May 26, 2026, IBBI proposes procedural requirements to ensure stakeholders are informed of the legal position. Under the proposal, debtors or creditors, as applicable, would be required to inform counterparties that interim moratorium protections under sections 96 and 124 no longer apply to pending personal guarantor proceedings.

5. Express Clarification Regarding Recovery Proceedings Against Personal Guarantors: The proposed amendments clarify that creditors may continue or initiate recovery proceedings against personal guarantors in cases where insolvency or bankruptcy applications were pending admission as on May 26, 2026. The proposal seeks to remove uncertainty arising from the legislative removal of interim moratorium protections for personal guarantors.

6. Continuation of RP’s Functions During Pendency of Section 12A Applications: Stakeholders have sought clarity on whether insolvency processes effectively pause once a withdrawal application under section 12A is filed. IBBI proposes an express clarification that the RP shall continue discharging all responsibilities under the CIRP until the Adjudicating Authority decides the withdrawal application. This proposal seeks to avoid uncertainty regarding process continuity during the pendency of section 12A proceedings.

7. Simplification of Stakeholder List Modifications During Liquidation: The discussion paper also proposes removal of the requirement that liquidators approach the Adjudicating Authority for modification of entries in the list of stakeholders. According to IBBI, this requirement has become less relevant following the continuation of the CoC during liquidation under the Insolvency and Bankruptcy Code (Amendment) Act, 2026. The proposal is expected to reduce procedural delays and administrative burden during liquidation processes.

Conclusion

The proposed amendments are intended to streamline insolvency and liquidation proceedings, strengthen confidentiality around valuation exercises, align regulations with the recent 2026 legislative reforms, and reduce procedural burdens on insolvency professionals and liquidators. Collectively, the proposals reflect IBBI’s continuing efforts to fine-tune the insolvency framework through targeted regulatory interventions.