The Insolvency and Bankruptcy Code (Amendment) Act, 2026

The Insolvency and Bankruptcy Code (Amendment) Act, 2026, introduces significant reforms to the 2016 Insolvency and Bankruptcy Code, focusing on streamlining processes, enhancing creditor rights, and introducing new frameworks for group and cross-border insolvency. The following are the salient highlights of the amendments notified on April 06, 2026:

1. New Insolvency Frameworks

Creditor-Initiated Insolvency (Chapter IV-A): This new process allows specific classes of financial institutions to initiate insolvency resolution by appointing a resolution professional directly, provided they have 51% approval from relevant financial creditors. The process is deemed to commence upon a public announcement rather than an initial court application.

Group Insolvency (Chapter VA): The Act empowers the Central Government to create rules for coordinating insolvency proceedings for corporate debtors that are part of the same "group". This includes the possibility of common Benches and coordinated committees of creditors.

Cross-Border Insolvency: Provisions are added to allow for the creation of rules regarding international cooperation, assistance, and the recognition of foreign insolvency proceedings.

2. Enhanced Creditor and Resolution Protections

Dissenting Financial Creditors: The amendment specifies that financial creditors who do not vote for a resolution plan must be paid at least the amount they would receive in a liquidation or according to their priority under Section 53, whichever is lower.

Protection of Licenses: Licenses, permits, and quotas held by a corporate debtor cannot be suspended or terminated during a resolution plan's subsistence, provided obligations are met.

Guarantor Assets: Creditors can now permit the transfer of assets belonging to a personal or corporate guarantor as part of a resolution plan, subject to specific CoC approval thresholds.

3. Procedural Efficiency and Timelines

Adjudicating Authority Timelines: The Adjudicating Authority (AA) must generally pass orders on applications within 14 days; if delayed, it must record the reasons in writing.

"Implementation First" Approval: With 66% CoC approval, the AA can first approve the implementation of a resolution plan and decide on the distribution details later (within 30 days).

Restoration of CIRP: The AA may restore a Corporate Insolvency Resolution Process (CIRP) once instead of proceeding to liquidation, provided the CoC applies for it with a 66% vote.

4. Regulatory and Disciplinary Updates

CoC Supervision of Liquidation: The Committee of Creditors (CoC) will now supervise the liquidation process and has the power to replace a liquidator with a 66% vote.

Service Providers: A new broad definition for "service provider" is introduced, covering insolvency professionals, agencies, information utilities, and registered valuers.

Penalties: New penalties are established for initiating "frivolous or vexatious" proceedings, ranging from one lakh to two crore rupees.

Electronic Portal: The Central Government is authorized to provide an electronic portal for managing insolvency and bankruptcy procedures.

5. Clarifications and Legal Continuity

Avoidance Transactions: The Act clarifies that proceedings for avoidance transactions (like undervalued or preferential transactions) can continue even after the CIRP or liquidation process is completed.

Security Interest: This is clarified to exist only through an agreement or arrangement between parties, excluding interests created "merely by operation of law".