Key Amendments to the Insolvency and Bankruptcy Code (IBC), 2025

Overview of the Insolvency and Bankruptcy Code

The Insolvency and Bankruptcy Code (IBC) is India’s singular statutory framework for handling insolvency, prioritizing swift resolution, asset preservation, and equitable treatment of stakeholders. Yet, while its ambitions are clear, persistent loopholes and process delays have compelled a wave of reforms culminating in the transformative 2025 amendments, which seek to address creditor concerns, procedural inefficiencies, and loopholes hindering the robust operation of the IBC.

Principal Amendments to the IBC

The Insolvency and Bankruptcy Code (IBC) operate through key committees to ensure effective implementation and oversight. The Committee of Creditors (CoC), made up of financial creditors, is the main decision-making body during insolvency resolution, approving plans, supervising insolvency professionals, and overseeing liquidation when needed. Recent reforms have enhanced the CoC’s powers, including liquidator appointments.

The Monitoring Committee, a newer addition, oversees the execution of resolution plans, ensuring compliance and reporting progress to authorities. Disciplinary Committees under the Insolvency and Bankruptcy Board of India (IBBI) regulate insolvency professionals by enforcing ethical standards and handling misconduct complaints, safeguarding transparency.

Major Changes Introduced in the Insolvency and Bankruptcy Code (Amendment), 2025

Creditor-Initiated Insolvency Resolution Process (CIIRP)

The Insolvency and Bankruptcy Code (Amendment) Act, 2026 (No. 6 of 2026, assent 6 April 2026) enacts a formal mechanism known as the Creditor-Initiated Insolvency Resolution Process (CIIRP) (Sections 58A to 58K). However, S.O. 2625(E) dated 22 May 2026 (w.e.f. 26 May 2026) did not commence Section 40 of the Amendment Act, which inserts it, so CIIRP is enacted but not yet in force. Under it, designated financial creditors holding at least 51% of the debt value would be able to initiate the process. CIIRP is not outside the purview of the courts: the Adjudicating Authority retains oversight (Section 58B(4), conversion and plan approval). Unlike traditional insolvency resolution processes, CIIRP would allow the existing management to maintain operational control of the company, albeit under the supervision of insolvency professionals. The primary objective of CIIRP is to facilitate an expedited and efficient resolution of financial distress, minimizing disruption to the business and preserving asset value. This structure provides a balanced approach, ensuring creditor oversight while allowing the company to continue its operations during the resolution process.

Abolition of Fast-Track Insolvency

The special “fast-track” insolvency route has been removed. Now, all insolvency cases will follow a single, uniform process. This reduces confusion, avoids duplication, and brings more clarity and consistency to the system.

Stronger Powers for the Committee of Creditors (CoC)

The amendments give the Committee of Creditors greater authority during liquidation, allowing it to supervise the entire process, appoint the liquidator, and remove the liquidator if their performance is unsatisfactory. This enhances creditor oversight, improves accountability, and supports better recovery of assets.

Procedural Reforms under the IBC (Amendment), 2025

• Timelines and Moratorium Changes

The 2025 amendments tighten timelines to make insolvency cases move faster and reduce delays. The moratorium (a pause on legal actions against the debtor during insolvency) has been refined to stop misuse. A key change is that personal guarantors of companies will no longer get interim moratorium protection automatically. This ensures that guarantees are enforced properly and creditors are not blocked from recovery.

• Strengthened Role of the IBBI

The Insolvency and Bankruptcy Board of India (IBBI) has been granted expanded authority under the 2025 amendments to comprehensively regulate the insolvency ecosystem. This includes overseeing a wider category of insolvency professionals and service providers, enforcing stringent professional and ethical standards, and prescribing detailed regulations for the operation of the Committee of Creditors (CoC). Additionally, the IBBI is empowered to establish conduct guidelines to ensure accountability and transparency among CoC members, thereby strengthening the governance framework for insolvency resolution.

Addressing Abuse and Frivolous Proceedings under the IBC (Amendment), 2025

• Stricter Penalties for Misusing the Insolvency System

The 2025 amendments add stricter punishments for anyone who misuses the insolvency system such as filing cases with hidden motives, using insolvency to pressure others, or dragging parties into unnecessary court battles. These changes aim to stop harassment of genuine debtors, prevent the system from being misused as a weapon, and ensure cases are filed only when there is real financial trouble.

• Stronger Action Against Fraudulent and Unfair Transactions

The amendments make the rules stricter for questionable transactions done before insolvency like selling assets too cheaply, giving unfair advantage to some creditors, or shifting assets to related parties. Resolution professionals and liquidators now have clearer powers to challenge and undo these transactions. They can also hold people responsible for fraudulent or improper trading. Also they are empowered to recover value that should rightfully go to creditors.

Cross-Border Insolvency and Group Insolvency under the IBC (Amendment), 2025

• New Rules for Group Insolvency

Many large business groups have several connected companies. When one or more of them face insolvency, separate proceedings can create confusion and delay.

The Insolvency and Bankruptcy Code (Amendment) Act, 2026 enacts a group insolvency framework (Section 59A) that would enable coordinated resolution of multiple group companies by aligning timelines, creating unified decision-making through shared creditor committees, and improving the handling of inter-company claims. However, S.O. 2625(E) dated 22 May 2026 (w.e.f. 26 May 2026) did not commence Section 42 of the Amendment Act, which inserts it, so the group insolvency framework is enacted but not yet in force.

• Clearer Cross-Border Insolvency Guidelines

Businesses today operate across borders, so insolvency often involves foreign assets, creditors, or proceedings.

The Insolvency and Bankruptcy Code (Amendment) Act, 2026 enacts a cross-border insolvency provision (Section 240C) that would enable recognition of foreign insolvency proceedings, promote cooperation between Indian and foreign courts, and establish rules for managing overseas assets and foreign creditors. However, S.O. 2625(E) dated 22 May 2026 (w.e.f. 26 May 2026) did not commence Section 240C, so it is enacted but not yet in force. This would align India with global practices, improve the handling of multinational insolvencies, and increase the confidence of international investors and lenders.