The government may allow creditors to sell or transfer assets of a guarantor even while insolvency proceedings are underway. The Insolvency and Bankruptcy Board of India (IBBI) has proposed a framework under which a creditor that has already taken possession of a guarantor’s asset can ask the resolution professional (RP) to value it and place a proposal before the committee of creditors (CoC) for its transfer—subject to approvals and treatment of proceeds.
At present, the sale or transfer of a guarantor’s asset is not permitted once the corporate insolvency resolution process (CIRP) or personal insolvency proceedings have begun.
What do experts say?
Experts say the move could be a significant value-maximising reform. It may ease resolutions in cases where critical land or other assets are held by guarantors rather than the debtor, though it could also complicate valuation and stakeholder negotiations.
“The most significant change is the proposal to allow transfer of assets of a personal or corporate guarantor in the possession of a creditor during the CIRP. What remains to be seen is how effectively these changes are implemented and what consequences follow for non-compliance,” said Prateek Kumar, partner at Khaitan & Co.
In a discussion paper, the IBBI has proposed 11 key changes to the CIRP Regulations, 2016, following the recent amendments to the Insolvency and Bankruptcy Code (IBC) cleared by Parliament earlier this month.
Another major proposal seeks to tighten requirements for operational creditors filing insolvency applications. They may be required to submit additional details such as GST filings, e-way bills (where applicable), records of partial payments, guarantees, statements of account, related-party status, and details of other recovery proceedings.
This is expected to curb incomplete or frivolous filings and enable faster scrutiny at the admission stage, reducing early-stage disputes over the existence of default.
Section 9 of the IBC allows operational creditors—including suppliers, employees and government departments—to initiate insolvency proceedings against a defaulting company. The IBBI has also proposed that companies voluntarily initiating insolvency proceedings disclose more comprehensive information upfront.
This would include bank account details, asset registers, receivables, lists of creditors, ongoing litigation, employee dues, related-party transactions and regulatory approvals. Such disclosures could significantly improve day-one readiness for the CIRP.
Experts say this push for fuller upfront disclosure is overdue. “Resolution applicants often bid with one eye closed—financials are incomplete, liabilities surface late, and that uncertainty depresses bids or derails processes. Better disclosures should improve confidence and pricing,” said Vishwas Panjiar, managing partner at SVAS Business Advisors LLP.
Additionally, the IBBI has proposed changes to Regulation 39 to allow RPs to submit two separate resolution plans to the National Company Law Tribunal (NCLT) in cases where inter-creditor disputes over distribution arise.
Further, the regulator plans to strengthen information-gathering and asset-tracing mechanisms by expanding Regulation 3A of the CIRP Regulations to align with the amended Section 19 of the IBC. This would require even former employees and service providers associated with a company under insolvency to share relevant information with RPs.