Key Amendments To The CIRP And Liquidation Regulations

Introduction

The Insolvency and Bankruptcy Code, 2016 (“Code”) provides a time-bound and creditor-driven framework for resolution of distressed corporate debtors. Pursuant to the amendments made to the Code by the Insolvency and Bankruptcy Code (Amendment) Act, 2026 (“2026 IBC Amendment”), the Insolvency and Bankruptcy Board of India (“IBBI”) has now notified amendments to various regulations promulgated under the Code, including the IBBI (Insolvency Resolution Process for Corporate Persons) Regulations, 2016 (“CIRP Regulations”) and the IBBI (Liquidation Process) Regulations, 2016 (“Liquidation Regulations”).

The IBBI (Insolvency Resolution Process for Corporate Persons) (Third Amendment) Regulations, 2026, the IBBI (Insolvency Resolution Process for Corporate Persons) (Fourth Amendment) Regulations, 2026, and the IBBI (Liquidation Process) (Fourth Amendment) Regulations, 2026, through which the aforementioned amendments have been made, are hereinafter collectively referred to as the “Amendment Regulations”.

In its press releases dated June 4, 2026, IBBI has stated that the amendments seek to improve availability of information, reduction in avoidable disputes and alignment of the insolvency framework with the amendments made to the Code by the 2026 IBC Amendment. This update discusses some of the key amendments introduced by the Amendment Regulations.

Key Amendments

Treatment of Guarantor Assets

Regulations 28A and 28B of the CIRP Regulations operationalize Section 28A of the Code which was introduced by the 2026 IBC Amendment for transfer of assets of guarantors under the corporate insolvency resolution process (“CIRP”) of the corporate debtor. Essentially, Section 28A of the Code now enables the transfer of an asset of a personal guarantor or corporate guarantor as part of the corporate debtor's CIRP, where a secured creditor has already taken possession of that asset through enforcement of its security interest. Such transfer requires prior approval of the committee of creditors (“CoC”) and should be in compliance with the conditions prescribed under Section 28A of the Code.

Regulation 28A of the CIRP Regulations lays down the procedure required to be followed by the resolution professional (“RP”) for placing such a proposal before the CoC, including the basic disclosures required to be made to the CoC, including, the description of the asset, estimated realisable value, and the necessary consents obtained for the transfer of the asset as prescribed in Section 28A of the Code. Further, Regulation 28A and Regulation 28B of the CIRP Regulations also prescribe the process which should be followed, upon the CoC consenting to the transfer of the assets of the guarantor under the CIRP of the corporate debtor, including facilitation of the transfer and the treatment of the proceeds received from the transfer. 

These amendments made to the Code and the CIRP Regulations ensure that guarantor-linked assets can now be factored into the CIRP of a corporate debtor through a formal CoC-approved and disclosure-based process, instead of being dealt with outside the resolution framework, especially in case of real estate projects where the promoter (being the corporate debtor) is different from the landowners or in case of promoter-backed projects where meaningful recovery may lie beyond the corporate debtor’s own assets.

Withdrawal of CIRP

Section 12A of the Code was substituted by the 2026 IBC Amendment, whereby a withdrawal application (with the approval of 90% of the CoC by voting share) can now be made only after the constitution of the CoC and before the first invitation is issued for submission of resolution plans.

In pursuance of this amendment, Regulation 30A of the CIRP Regulations has been amended, whereby the RP is required to file the withdrawal application within 3 days of CoC approval in the requisite format, together with a bank guarantee or demand draft towards estimated process costs. If withdrawal is approved, actual costs must be deposited within 3 days of such approval, failing which the bank guarantee or demand draft may be invoked or encashed.

These amendments have been made with the aim to make withdrawals from CIRP time-bound and cost-protected, protect the integrity of the resolution process and the interests of prospective resolution applicants, and reduce the scope for strategic or belated settlements.

Restoration of CIRP

The newly inserted Sections 33(1A) and 33(1B) of the Code introduce a one-time mechanism to restore CIRP before a liquidation order is passed. Pursuant to Section 33(1A) of the Code, where no resolution plan has been received within the prescribed timeline or the resolution plan has been rejected, the RP may, with the approval of at least 66% of the CoC by voting share apply for restoration of the CIRP. As per Section 33(1B) of the Code such restoration can be granted only once.

Regulation 40F of the CIRP Regulations provides that the CoC shall be given an opportunity to apply for restoration of the CIRP before the liquidation order is passed and until such application is decided by the adjudicating authority, the RP shall continue to perform his functions as provided under the Code. It has been further prescribed that an application for restoration should be submitted along with a note setting out the reasons for seeking restoration and the timeline within which the CIRP is proposed to be completed.

The amendment seeks to give a second life to corporate debtors and to achieve resolution before liquidation in order to maximize value for all stakeholders.

Dissolution of Corporate Debtor

Regulation 40E of the CIRP Regulations gives effect to the amendments made to Section 33(2) of the Code by the 2026 IBC Amendment, which permits the CoC to approve (by a majority of 66% voting share) the dissolution of a corporate debtor.

Regulation 40E permits the CoC to seek dissolution where the assets of the corporate debtor are insufficient to meet CIRP and likely liquidation costs, or where such assets cannot be effectively realized in ordinary liquidation. The application must be filed within 10 days of the CoC’s approval and must include details of assets, claims, avoidance transactions, contingent assets and reasons showing why continuation of the process is not economically beneficial for all concerned stakeholders.

These amendments were introduced to avoid unnecessary liquidation proceedings where a corporate debtor has no viable prospects of resolution and no assets available for distribution. By allowing an early dissolution of such companies, costs can be reduced and the overall efficiency of the insolvency framework can be improved.

Supervisory Role of CoC in Liquidation

The 2026 IBC Amendment has introduced certain key amendments (such as Section 34A and Section 35(2) of the Code) for granting supervisory powers to the CoC in the liquidation process. In pursuance of the same, a slew of changes have now been made in the Liquidation Regulations whereby the liquidator is required to take the permission of the CoC prior to undertaking any material actions during the liquidation process, such as, for sale of assets, incurring costs, appointing professionals, instituting suits or proceedings, etc.

Further, Regulation 8 of the Liquidation Regulations now provides that the CoC constituted under Section 21 of the Code shall continue during the liquidation process, save and except for those secured creditors who have chosen to realise their security outside of the liquidation.

Conclusion

The 2026 IBC Amendment together with the Amendment Regulations, introduce greater procedural discipline, clearer disclosures, tighter timelines and stronger creditor oversight. Overall, the amendments are likely to make the insolvency and liquidation regime more transparent, accountable and commercially efficient, while reducing avoidable disputes, costs and value erosion.

Please find attached the copies of the regulation, here.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.