Context:
On 12 August 2025, Finance Minister Nirmala Sitharaman introduced the Insolvency and Bankruptcy Code (IBC) Amendment Bill in the Lok Sabha. The Bill proposes major reforms, including group insolvency, cross-border insolvency, and pre-packaged insolvency for large corporations, aimed at speeding up admission, resolution, and liquidation processes.
What is IBC?
Insolvency and Bankruptcy Code (IBC)
- Introduced – 2016
- Purpose – To provide a time-bound process for resolving insolvency (when individuals or companies can’t repay debts) and, if necessary, liquidation.
- Nodal Ministry – Ministry of Corporate Affairs
- Regulator – Insolvency and Bankruptcy Board of India (IBBI)
Key Highlights:
New Concepts Introduced
- Group Insolvency – Allows joint resolution of multiple companies in the same group to avoid loss of value.
- Cross-Border Insolvency – Creates rules for dealing with cases involving foreign creditors or overseas assets.
- Pre-Packaged Insolvency for Large Corporates – Enables faster, cheaper, and less disruptive resolutions.
- Personal Guarantor Assets – Lets lenders take over personal guarantors’ assets during insolvency proceedings.
- Secured Claims Clarification – Government or state claims will be “secured” only if there is a contract; statutory claims won’t get automatic priority.
Group Insolvency Mechanism
- Central government will set rules for insolvency of two or more group companies.
- May have a common Bench, shared insolvency professional, joint Committee of Creditors (CoCs), and coordinated hearings.
- Example – Useful for companies like Gensol and BluSmart that are in the same group.
Procedural Reforms Proposed
- Mandatory Admission – If a financial creditor proves default, insolvency must be admitted.
- CCI Approval – Needed after the resolution plan is filed with the adjudicating authority.
- Avoidance Proceedings – Can continue even after the main insolvency process (CIRP) ends.
- Extended Moratorium – The CIRP moratorium will continue into liquidation stage.
- New Creditor-Initiated Insolvency Process (CIIRP) – Must be completed within 150 days.
- Interim Moratorium Removal – For personal guarantors.
- Single Electronic Portal – For all IBC-related filings and processes.
