Fresh IBC amendments: How govt looks to plug gaps in insolvency code, Pg17

Key Highlights:

• Parliament passed the Insolvency and Bankruptcy Code (Amendment) Bill, 2026 to improve the resolution process for defaulting companies.
• The amendment introduces an out-of-court mechanism (CIIRP), provisions for group insolvency, and cross-border insolvency.
• NCLT must now admit insolvency applications once a default is proven, streamlining the initial stage.
• As of December 2025, the IBC has facilitated the resolution of 1,376 companies, helping creditors recover ₹4.11 lakh crore.

Detailed Insights:

• The IBC, enacted in 2016, aims to revive companies defaulting on loans through resolution or liquidation, but has faced criticism for delays and low recovery rates.
• The Creditor-initiated Insolvency Resolution Process (CIIRP) allows specified financial creditors, with at least 51% agreement, to initiate an out-of-court resolution.
• The amendment incorporates all 11 recommendations from a Select Committee, including a three-month timeline for NCLAT to reduce appellate delays.
• The amendments aim to align domestic processes with international best practices, improving investor confidence through frameworks for group insolvency and cross-border insolvency.
• The Select Committee recommended preventing Resolution Professionals (RP) from becoming liquidators to avoid conflicts of interest and incentivizing liquidation over resolution.
• The voting threshold for pre-packaged insolvency resolution process (PPIRP) has been lowered to 51%, and IBBI is empowered to set timelines for the Committee of Creditors.
• The government clarified that the IBC is intended for rescuing viable businesses and resolving financial stress, not merely as a debt recovery tool.

Key Concepts Involved:

• Insolvency and Bankruptcy Code (IBC): A law that consolidates and amends laws relating to reorganization and insolvency resolution of corporate persons, partnership firms and individuals in a time-bound manner.
• National Company Law Tribunal (NCLT): A quasi-judicial body that adjudicates issues relating to companies.
• Resolution Professional (RP): A professional appointed to manage the affairs of a company undergoing the insolvency resolution process.