IBBI Issues Fourth Amendment to Insolvency Rules, Enhancing Creditor Role and Cost Oversight [Read Notification]

The Insolvency and Bankruptcy Board of India (IBBI) has notified the Insolvency Resolution Process for Corporate Persons (Fourth Amendment) Regulations, 2026, introducing important changes aimed at strengthening creditor participation and tightening control over insolvency costs.

Under the amendment, the composition of the Committee of Creditors (CoC) has been revised to include the 18 largest unrelated operational creditors. If fewer than 18 such creditors exist, all must be included. This change ensures broader representation and prevents conflicts of interest.

A new provision, Regulation 16E, mandates that when non-bank creditors hold more than 66% of voting shares, the resolution professional must invite the five largest unrelated operational creditors, including the three biggest statutory dues creditors, to attend CoC meetings as observers. While they will not have voting rights, their views must be recorded in the minutes, enhancing transparency in decision-making.

The amendment also substitutes Regulation 31B, requiring prior CoC approval for all insolvency resolution process costs after the first meeting. Resolution professionals must present a Going Concern Assessment Report, detailing projected income, expenses, cash flows, working capital needs, and risks of value erosion.

As per the amendment, at each meeting, professionals must compare actual costs with previously approved estimates to ensure accountability for expenditure.

Also, changes to Regulation 39 require the CoC to document its reasoning on the feasibility and viability of each resolution plan, expected recoveries compared to fair and liquidation values, and the adequacy of market discovery processes, including challenge mechanisms or re-invitation of plans.

IBBI Chairperson Ravi Mittal emphasized that the amendments are designed to improve transparency, creditor confidence, and efficiency in the corporate insolvency resolution framework.

Insolvency and Bankruptcy Board of India (IBBI)

The Insolvency and Bankruptcy Board of India (IBBI) is a statutory body established under the Insolvency and Bankruptcy Code, 2016 to oversee and regulate insolvency proceedings for companies, limited liability partnerships, and individuals. It ensures that insolvency processes are conducted transparently, efficiently, and in accordance with the law.

The Board frames regulations, registers insolvency professionals and agencies, and monitors their performance to maintain discipline and accountability in the system.

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