The Insolvency and Bankruptcy Board of India (IBBI) has issued a Discussion Paper proposing amendments to the Insolvency Resolution Process for Personal Guarantors to Corporate Debtors. The proposals seek to strengthen safeguards and bring the framework for personal guarantors closer to the corresponding safeguards applicable in the corporate insolvency resolution process.
The following has been stated:
The IBBI has identified four areas where safeguards available during the Corporate Insolvency Resolution Process (CIRP) do not have equivalent provisions in the insolvency resolution process of personal guarantors:
Exclusion of related parties from voting: A related party of the personal guarantor would be assigned a Nil voting share in relation to the repayment plan. The list of creditors would also separately indicate whether a creditor is a related party of the guarantor.
Identification and reporting of avoidance transactions: The resolution professional would be required to examine whether the personal guarantor has been a party to transactions covered under Sections 164, 164A, 165 or 167 of the Code, record the findings with supporting particulars and place them before creditors. Where such a transaction is identified, the resolution professional may take action as a bankruptcy trustee could have taken if a bankruptcy order had been passed.
Valuation of assets of the personal guarantor: The resolution professional would be required to appoint a registered valuer to determine the fair value and realisable value of the guarantor's assets. The valuation report, along with the fair and realisable values, would be placed before creditors for consideration of the repayment plan.
Recording of creditors' deliberations: The resolution professional would be required to record the deliberations and reasons of creditors for their decision on the repayment plan. These would include, among other matters, admitted claims, proposed repayment, duration and certainty of payments, assets and liabilities of the guarantor, income and repayment capacity, relevant transactions, and the feasibility and viability of the repayment plan. Where the proposed repayment is significantly lower than the admitted claims or estimated realisable value of assets, the reasons for preferring the repayment plan over bankruptcy would have to be specifically recorded.
Public comments on the proposals may be submitted electronically by October 3, 2026 through the IBBI website. Stakeholders may submit general or proposal-specific comments, including comments concerning inconsistencies, implementation difficulties, or provisions that should be added or removed.
