ICAI Proposes Key Reforms to India's Insolvency and Bankruptcy Code

The Institute of Chartered Accountants of India (ICAI) has submitted its detailed suggestions to the Select Committee of Parliament, headed by BJP MP Baijayant Panda, concerning the proposed amendments to the Insolvency and Bankruptcy Code (IBC), 2025. These recommendations are aimed at enhancing and streamlining the insolvency resolution framework in India. ICAI, representing approximately 60% of registered insolvency professionals, provided input on draft provisions designed to improve operational efficiency. The IBC Amendment Bill, 2025, introduces several key reforms, including an out-of-court mechanism for resolving business failures, frameworks for group and cross-border insolvencies, and measures to reduce delays in admitting insolvency applications. It also seeks to expand the definition of a resolution plan and decriminalise certain procedural actions. Finance and Corporate Affairs Minister Nirmala Sitharaman stated that the amendments aim to reduce delays, maximize value for all stakeholders, and improve governance. Since its enactment in 2016, the IBC has been a crucial mechanism for resolving stressed assets, having undergone six amendments prior to this proposal.

Impact These proposed changes are expected to significantly improve the efficiency and effectiveness of India's corporate insolvency resolution process. By streamlining procedures, reducing timeframes, and introducing more flexible resolution options, the reforms aim to provide quicker solutions for distressed companies, better protect creditor interests, and foster a more robust business environment, ultimately boosting investor confidence.

Rating: 8/10

Difficult Terms: Insolvency: A state where a person or company is unable to pay their debts. Bankruptcy Code: A law that provides a legal framework for dealing with insolvency and bankruptcy cases. Parliamentary Panel: A group of Members of Parliament formed to study specific issues and report back with recommendations. Insolvency Resolution Framework: The system and rules in place to manage and resolve cases where a company or individual is unable to pay its debts. Stakeholders: Individuals or groups who have an interest in a company, such as shareholders, creditors, employees, and customers. Resolution Plan: A proposal detailing how a distressed company's debts will be repaid and how it will continue operating, approved by creditors and the court. Cross-border Insolvencies: Situations where a company's insolvency proceedings involve entities or assets in more than one country. Decriminalise: To remove criminal penalties associated with certain actions, often replacing them with civil or administrative penalties.