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Informist, Monday, Nov. 17, 2025

 

NEW DELHI – The Insolvency and Bankruptcy Board of India Monday suggested that the committee of creditors of a company undergoing corporate insolvency process should mandatorily give reasons for recommending liquidation of the debt-ridden company if the resolution plan of value greater than liquidation value was received. 

 

The reasons for such recommendation must be mandatorily recorded in the minutes of the meeting and furnished along with the liquidation application, said the board in a discussion paper for strengthening safeguards and transparency in the insolvency process. The board has invited comments from the stakeholders on its suggestions by Dec. 8.

 

The board noted that in certain corporate insolvency resolution processes, the committee of creditors had recommended liquidation despite receipt of compliant and viable resolution plans, sometimes having value even more than liquidation value of assets of the corporate debtor. In many such cases, the minutes of the committee of creditors' meetings do not record the rationale for recommending liquidation, said the board. Under the current insolvency laws, the committee of creditors may record considerations for liquidation but does not make it mandatory. The amendment will improve accountability, reinforce the principle of reasoned decision-making and ensure transparency, said the board.

 

Further, the board suggested safeguards where no financial institutions were represented in the committee of creditors and a single unregulated financial creditor held more than 66% voting share. In these cases, the resolution professional shall invite the five largest operational creditors by admitted claim value to attend committee of creditors meetings as observers. Such observers shall be entitled to receive notice, agenda, and minutes and may participate in deliberations without voting rights, the board suggested. All decisions taken by such a committee of creditors shall be recorded with detailed reasons in the minutes, the board added.  End

 

Reported by Surya Tripathi

Edited by Akul Nishant Akhoury

 

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