On 12th August 2025, the Insolvency and Bankruptcy Code (Amendment) Bill 2025 has been introduced in the Lok Sabha. The major changes introduced in the bill are as follows:-
1. New Definitions & Clarifications
Security Interest clarified to exist only if created through an agreement between two or more parties, not merely by operation of law.
Service Provider introduced as a defined term to include insolvency professionals, agencies, information utilities, and others notified by the government.
Avoidance Transaction (covering Sections 43, 45, 49, 50) and Fraudulent/Wrongful Trading (Section 66) definitions added.
2. Procedural Changes in Initiation of CIRP
Section 7, 9, 10 timelines made stricter: Adjudicating Authority must decide within 14 days and record reasons for delay.
Multiple CIRP applications: initiation date fixed as date of first application.
Removal of certain provisos, simplification of conditions for admitting applications.
3. Withdrawal of Admitted Applications (Section 12A)
New rules: Withdrawal not allowed before CoC constitution or after first invitation for resolution plans.
CoC approval required with 90% voting share; decision to be made within 30 days.
4. Moratorium Scope Expanded
Clarified that moratorium applies to actions by sureties against corporate debtors under guarantee contracts.
5. Appointment & Role of IRP / RP
Streamlined appointment process; disciplinary checks remain.
For Section 10 cases, IRP to be recommended by IBBI.
IRP empowered to verify and value claims during collation.
6. Obligations on Corporate Debtor Personnel
“Personnel” expanded to “Persons” (includes promoters, management, contractual associates).
Duty to cooperate with IRP/RP/Liquidator clarified and broadened.
7. Liquidation Process Changes
CoC to supervise liquidation (Section 21(11)).
New Section 34A – CoC can replace a liquidator by 66% vote.
Restrictions on RP being appointed as liquidator if their resolution plan was rejected for non-compliance.
Clearer rules on secured creditor rights and deemed relinquishment of security if not claimed in time.
8. Distribution Waterfall Clarifications (Section 53)
Clarifies treatment of partially secured creditors (secured for part of debt, unsecured for rest).
Clarifies distribution of government dues within two years before liquidation.
Contractual priority arrangements between workmen and secured creditors disregarded, but arrangements between secured creditors remain valid.
9. Avoidance Transactions & Wrongful Trading
Sections 38–42 omitted; processes streamlined.
Look-back periods now calculated from initiation date to insolvency commencement date.
Section 47 expanded: creditors, members, or partners can file avoidance/wrongful trading applications if RP/Liquidator fails to act.
10. New Section 28A – Transfer of Guarantor Assets
Allows creditor to transfer guarantor’s asset during CIRP with CoC approval; rules for personal and corporate guarantors specified.
11. Resolution Plan Approval Changes (Sections 30 & 31)
New requirement to pay dissenting financial creditors at least the lower of:
Liquidation value; or
Priority distribution value under Section 53.
Adjudicating Authority can first approve plan implementation, then approve distribution.
Resolution plan approval/disapproval timelines fixed at 30 days.
Licences/permits not to be cancelled post-approval if obligations met.
All pre-approval claims against debtor extinguished (with certain exceptions for promoters/guarantors/joint obligors).
12. Liquidation Order & Restoration of CIRP (Section 33)
Adjudicating Authority can restore CIRP for up to 120 days before liquidation (only once).
Liquidation order timeline fixed at 30 days after application.
13. Dissolution Timelines (Section 54)
Liquidator must apply for dissolution within 180 days (extendable by 90 days).
CoC to decide how to handle pending avoidance/wrongful trading proceedings before dissolution.
14. Introduction of a New Chapter IV-A – Creditor-Initiated Insolvency Resolution Process
Applies to certain notified classes of corporate debtors.
Financial creditors (from specified institutions) can initiate process with 51% consent of same class creditors.
Corporate debtor gets 30 days to respond before initiation.
Process to be completed in 150 days (+ one 45-day extension).
Management remains with existing board/partners, but RP attends meetings and can reject resolutions.
Moratorium can be applied for during process.
Can be converted to regular CIRP in certain cases.
To download the bill, The Insolvency and Bankruptcy Code (Amendment) Bill 2025
