No More Hidden Deals: IBBI Mandates Disclosure of Avoidance Transactions in Resolution Plans [Read Notification]

The Insolvency and Bankruptcy Board of India (IBBI) issued Notification No. IBBI/2025-26/GN/REG128 dated 4th July 2025 announcing the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) (Fifth Amendment) Regulations, 2025. This amendment introduces stricter transparency norms in the corporate insolvency resolution process (CIRP).

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Under the new amendment, resolution professionals (RPs) are now required to disclose details of all identified avoidance transactions, as well as fraudulent or wrongful trading transactions, in the information memorandum and to all prospective resolution applicants before the last date for submission of the resolution plan.

Avoidance transactions include preferential, undervalued, extortionate credit, and fraudulent transactions that can be reversed to protect creditors’ interests under the Insolvency and Bankruptcy Code (IBC). Earlier, there were instances where these transactions were not disclosed to bidders, leading to hidden liabilities post-resolution and impacting fair price discovery.

Key changes introduced:

Regulation 36(1): Adds “and its subsequent updates thereof” to ensure ongoing updates in the information memorandum regarding the CIRP.

Regulation 36(2)(ha): Mandates disclosure of all identified avoidance transactions and subsequent filings before the adjudicating authority.

Regulation 38(2A): Prohibits resolution plans from including assignment of avoidance transactions if these were not disclosed in the information memorandum and to resolution applicants before the last date for plan submission, except for plans already submitted before this amendment came into force.

Impact

This amendment closes the window for hidden deals and unreported transactions within the CIRP process, aligning with IBBI’s push towards greater transparency and accountability in India’s insolvency ecosystem. It will protect the interests of resolution applicants by ensuring no post-approval surprises and improve valuation clarity for bidders, encouraging genuine participation. This will also help lenders recover maximum value by maintaining fair competitive bidding.

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