Simplifying the IBC (Amendment) Bill of 2025: Proposals and Examples

IBC (AMENDMENT) BILL, 2025: SIMPLIFIED

The Insolvency and Bankruptcy Code (IBC) was introduced in 2016 to handle Cases of companies or individuals unable to repay their debts. Over time, delays, misuse, and loopholes created problems. The new Bill of 2025 tries to fix these issues. Here are the Proposals explained simply with Examples:

1. Faster and Cleaner Admission of Cases

What changes: Cases should enter the system without long delays and confusion.
Example: If a bank files insolvency against a company like XYZ Ltd., the case should be admitted quickly instead of dragging for months due to technical objections.

2. Curbing Promoter Misuse at the Start

What changes: Promoters earlier tried to delay proceedings or regain control at a discount. The law now makes such tactics harder.
Example: If promoters of ABC Textiles push creditors to withdraw their insolvency petition after it is admitted, stricter rules now prevent such misuse.

3. Extending the ‘Look-Back’ Period

What changes: Suspicious past transactions of the debtor can now be investigated for a longer period.
Example: If PQR Constructions transferred assets to a sister company one year before insolvency, authorities can now look back further in time to undo such deals.

4. Clear Waterfall Mechanism

What changes: Payment priority clarified—workmen and employees get their dues along with secured creditors.
Example: If LMN Automobiles is liquidated, not only banks but also factory workers’ pending salaries will get equal treatment.

5. Second Chance for Revival

What changes: A company marked for liquidation may be given another chance if revival is possible.
Example: If JKL Pharma finds a buyer after liquidation begins, it can still be saved, protecting jobs and assets.

6. Creditor-Initiated Insolvency Resolution Process

What changes: Creditors start the process but a professional, not the debtor, controls resolution.
Example: For MNO Industries, banks initiate insolvency, but instead of management controlling the process, a professional ensures fair play.

7. Speeding Up Timelines

What changes: The law aims to stick closer to the 330-day limit for resolution, avoiding delays.
Example: Cases like Bhushan Steel, which dragged for years, should now finish closer to the mandated time.

8. Plugging Loopholes in Section 29A

What changes: Promoters barred from bidding for their own company cannot sneak back in.
Example: If RST Power Ltd. defaults, its old promoters cannot re-buy it through another route.

FAQs

1. Why are these changes needed?

Because insolvency cases in India were taking 500–700 days on average, against the 330-day deadline, leading to loss of value and delays for creditors.

2. How do workers benefit?

Their unpaid wages now get priority along with banks during liquidation.

3. Will companies in liquidation always get a second chance?

Not always—only when there is a credible buyer or revival plan, to preserve jobs and assets.

4. What about small businesses (MSMEs)?

The pre-pack insolvency model for MSMEs continues, but stricter checks ensure faster resolution.

5. Who manages the process now?

Resolution professionals, not company promoters, reducing conflicts of interest.