What IBBI's New CoC Standards Mean For Your Next Funding Round?

The Insolvency and Bankruptcy Board of India recently issued guidelines asking Committees of Creditors to document their recovery expectations more formally. If you're a CFO or finance leader at a growth-stage company that has participated in resolution proceedings either as a creditor or as an interested party then this shift matters, especially for your next institutional fundraising conversation.

Institutional investors now ask detailed questions about any IBC exposure during their legal review. The questions aren't accusatory but practical –

• How was the resolution plan evaluated? 
• What recovery analysis supported the vote? 
• Is the documentation sufficient to withstand potential challenges?

IBBI's new approach directly addresses this diligence concern.

Why does this come up in fundraising?

When companies participate in Committees of Creditors, the decisions made create a documented trail. Investment bankers and institutional investors review this trail during due diligence for two reasons.

First, they need to assess the contingent liabilities. If a resolution plan could face a Section 30(2) challenge, that's a potential future exposure. The question isn't whether the plan will be challenged but it's whether the documentation supporting it can survive scrutiny if challenged.

Secondly, they're evaluating the decision-making quality of the management. How a company's management evaluates recovery prospects and documents its commercial reasoning signifies its investors something about the financial discipline and governance maturity of the company.

IBBI's guidance helps on both these fronts. It creates a clearer framework for what “sufficient documentation” looks like.

Need of the legislation

The recent guidelines asks the CoCs to record three things specifically:

Recovery expectations: What recovery percentage does the CoC anticipate from the resolution plan, and what analysis is supporting that expectation?

Comparison benchmarks: How does the proposed recovery plan compare to the liquidation value and fair value of the enterprise?

Commercial rationale: What specific factors made this resolution plan acceptable compared to alternatives, including continuing the CIRP or moving to liquidation?

These aren't new obligations conceptually. The Insolvency and Bankruptcy Code already requires the decisions of the CoC to be commercially reasonable. What has shifted is the evidentiary standard. The analysis that might have been implicit now needs to be explicit and documented.

Existing in procedural gaps

Most companies that are participating in resolution proceedings, focus intensely on the commercial substance of the decision. The documentations sometimes receive less attention, not because of any oversight, but because the operational teams are managing complex, time-sensitive situations.

Three gaps show up frequently during investor diligence:

1. Recovery analysis exists but isn't in the CoC minutes. The commercial team configures the work, but the formal meeting record doesn't capture these analysis which creates a diligence gap even when the substance is sound.
2. Comparison to alternatives isn't documented explicitly. The CoC compared the resolution plan to other options, but the minutes don't show the comparison methodology i.e., the grounds on which the committee has arrived at its decision. During diligence, this can look like the analysis wasn't done, even when it has been undertaken by the CoC.
3. Individual creditor positions aren't clearly linked to aggregate CoC decisions. When multiple creditors participate, their individual recovery analysis sometimes aren't aggregated into a clear CoC-level rationale that's documented in meeting records.

These gaps don't typically indicate poor decision-making. They reflect the reality that resolution proceedings move quickly, and documentation priorities sometimes lag operational priorities.

Impact on Capital Markets Transactions

For companies preparing for institutional funding or eventual public listings, these documentation gaps create two specific problems.

The first is disclosure complexity. Material litigation including potential challenges to resolution plans requires disclosure in offer documents and investor presentations. If the underlying documentation is sparse, it becomes harder to explain why a particular exposure is remote or immaterial.

The second is valuation friction. When diligence teams find documentation gaps, they often respond by creating contingent liability reserves or valuation adjustments. This isn't punitive. It's conservative financial modeling when risk can't be precisely quantified.

Both problems are solvable through better and effective documentation at the CoC stage.

Practical Framework for Capital-Markets-Ready Documentation

Here's a practical approach that aligns with what institutional diligence teams look for:

1. Document the recovery analysis in real-time: If your commercial team builds a recovery model or comparative analysis, ensure thatthe substance gets reflected in CoC meeting minutes or attached annexures. The analysis doesn't need to be recreated, it just needs to be formally captured.
2. Make comparisons explicit: When evaluating a resolution plan, explicitly record how it compares to liquidation value and what specific factors justified accepting the proposed recovery level. This doesn't require complex financial modeling in the minutes themselves and hence a clear summary works.
3. Connect individual positions to collective decisions: If different creditors have different recovery expectations or risk appetites, then ensure to document how such positions have affected the overall decision of the CoC. This shows reasoned collective judgment rather than just mechanical voting.
4. Keep records assuming future review: IBBI's guidance reflects a reality that already exists being, resolution decisions get reviewed during litigation, regulatory scrutiny, and investor diligence. Documentation should be created with that reality in mind, not reactively after such occurrence.

Closing the existing gap

For companies already participating in the ongoing resolution processes, this is straightforward. Apply the enhanced documentation approach starting with the next CoC meeting.

For companies with past CoC participation that's now being reviewed during fundraising diligence, the situation is different. Past documentation can't be recreated retroactively. But it can be supplemented with contemporaneous analysis that still exists in commercial models, email threads, board papers, to show the substance behind formal meeting records.

The earlier this gets addressed relative to fundraising timelines, the smoother the diligence process becomes.

What Investors are actually looking for ?

Institutional investors aren't looking for perfection in resolution proceedings. They understand these are complex, time-pressured situations with multiple stakeholders and imperfect information.

What they're assessing is whether the process was disciplined and whether the documentation supports the commercial judgment that was made. IBBI's guidance creates a clearer roadmap for what “disciplined and documented” looks like.

For growth-stage companies building toward institutional funding or public listings, meeting that standard now avoids creating diligence friction later.

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.