India: A Restructuring/Insolvency Overview

The Insolvency and Bankruptcy Code, 2016 (IBC) provides for corporate reorganisation through a corporate insolvency resolution process (CIRP). Upon a company’s admission into a CIRP, several significant consequences follow: a moratorium takes effect restricting legal and enforcement actions against the borrower, the existing board of directors is suspended, and an insolvency professional is appointed to assume management and control of the borrower and to oversee its day-to-day operations during the insolvency resolution process.

However, a need was felt for an alternative debtor-in-possession-based restructuring mechanism with limited judicial involvement. Such a mechanism would encourage debtors to voluntarily submit to insolvency resolution whilst avoiding the delays that are inevitable given that CIRP is a heavily court-driven process. Therefore, to offer a more flexible regime, which enables incumbent management to continue to remain in control and reduces the time spent in adversarial proceedings, in August 2025, the government proposed amendments to the IBC (including the introduction of the creditor-initiated insolvency resolution process (CIIRP)). The amendments are expected to be enacted into law this year.

Key features of the proposed CIIRP regime include the following:

• Eligible borrowers: Borrowers eligible to undergo CIIRP will be notified separately, with reference to criteria such as assets, income or class of creditors.
• Approval requirements for initiation: Upon occurrence of a payment default, a CIIRP may be initiated by a financial creditor forming part of a specified class of financial institutions (to be notified in due course), with the approval of financial creditors holding at least 51% in value of the debt owed to that class. The financial creditor is required to inform the borrower of its intention to commence CIIRP and give it a period of 30 days to make any representations. If the debtor chooses to make a representation, then a fresh approval needs to be sought from the notified financial creditors.
• Appointment of resolution professional: Following such approval for commencement, a registered insolvency professional is appointed as the resolution professional who is tasked with making a public announcement of the initiation of the CIIRP, confirming that initiation requirements have been met, calling for submission of claims, constituting the committee of creditors (CoC), preparing the information memorandum, among others.
• Debtor-in-possession model: In a CIIRP, the existing board of directors remains in control of the borrower. However, the resolution professional is required to attend shareholder and board meetings and can reject any resolutions (subject to conditions that will be notified).
• Moratorium: Following commencement of a CIIRP, no CIRP petition or prepackaged insolvency resolution petition can be filed against the borrower. Unlike a CIRP, there is no automatic moratorium against enforcement actions upon initiation. However, notified financial creditors holding at least 51% (prior to constitution of the CoC) or the CoC (once constituted) can direct the resolution professional to apply for a moratorium before the insolvency tribunal (ie, the National Company Law Tribunal (NCLT)), which comes into effect upon filing of the application.
• Invitation of resolution plans: The resolution professional invites eligible bidders to submit a resolution plan for the borrower. A resolution plan approved by 66% of the CoC is submitted to the NCLT for its approval. Once approved, the plan binds all stakeholders.
• Period of CIIRP: The CIIRP is required to conclude within a period of 150 days (extendable by another 45 days upon CoC and NCLT approval).
• Conversion into CIRP: The NCLT can pass an order to convert the CIIRP into a CIRP, if no resolution plan is received before the expiry of the CIIRP; or it is satisfied that the borrower or its personnel has failed to cooperate with the resolution professional; if it rejects the submitted resolution plan; or if an application seeking such conversion is filed by the resolution professional (based on approval of the CoC).
• Limited role of NCLT: The NCLT’s role in CIIRP will be mainly restricted to hearing any objections from the borrower against the initiation of the CIIRP (on limited grounds of no default having occurred, or approval requirements for initiation not being followed); granting a moratorium (if sought); approval of the resolution plan and extending the period of CIIRP.

The CIIRP offers an efficient hybrid framework that combines the key advantages of a standard CIRP, such as cross-class cramdown, a moratorium (if sought by the CoC and the resolution professional) and whitewash of past liabilities whilst incorporating appropriate checks and balances to safeguard against potential misuse. Notably, any bidder under the CIIRP must comply with Section 29A of the IBC, which disqualifies certain categories of persons from submitting resolution plans including undischarged insolvents, wilful defaulters, persons who have been convicted of certain offences, and entities whose accounts have been classified as non-performing assets for a period of one year or more, among others. This will incentivise promoters to address financial stress at an early stage to ensure they remain eligible to submit resolution plans in CIIRP.

Significantly, by keeping the initiation process entirely out of court, the CIIRP may offer a substantial time advantage over existing restructuring mechanisms under the IBC. Both CIRPs and pre-packaged insolvency resolution processes require NCLT involvement at the admission stage as well as at the plan approval stage, whereas the CIIRP dispenses with judicial involvement at the initiation stage altogether. The phased introduction of the CIIRP through the notification of eligible borrowers and financial creditors will also enable any operational issues to be identified and resolved before the framework is extended more broadly.