Avoidance transactions must be announced in advance in the information memorandum: changed IBBI regulations

Avoidance transactions must be announced in advance in the information memorandum: changed IBBI regulations

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In an attempt to make resolution plans more transparent, the insolvency and bankrupty Board of India (IBBI) changed its regulations, whereby avoidance transactions must be announced in advance in the Information Memorandum drawn up by the resolution professional of the company debts.

Avoidance transactions include undervaluation, fraud, overvaluation, preferential distraction or a combination of these.

Now all avoidance transactions must necessarily be included in the Information Memorandum, according to the IBBI (Insolvency Resolution Process for Corporate Persons) (Fifth Amendment) Regulations, 2025.

This is now a mandatory part of the resolution plan and cannot be assigned without disclosures. What this means is that, according to experts, avoidance transactions cannot be brushed under the carpet

Resolution -applicants (potential buyers) will therefore be able to objectively assess the assets and liabilities of a company debts (CD) and place it accordingly; Creditors can also have realistic expectations of the resolution of a CD.

“Het probleem (met betrekking tot het vermijden van transacties) is tweevoudig. Veel schulden worden niet-presterende activa (NPA’s) vanwege frauduleuze omleidingen door gewetenloze promotors. En die accounts die NPA worden vanwege andere redenen, proberen ook het meest in te pakken voordat de wet de controle over de eenheid verliest,” zei Hari Hari, CEO, CEO, CEO, CEO, CEO, CEO, CEO, CEO, CEO, CEO, CEO, CEO, CEO in India.

He noted that all avoidance transactions are now being announced and tackled. The expected result would have a deterrent effect on unscrupulous promoters. For creditors there can be better value achievements under IBC.

According to IBBI data, until 31 March 2025 of 1,396 avoidance applications that collect £ 3,85,067 crore, until March 31, 2025. Of this, 368 applications that were aggregated £ 65,650 crore, with the amount that had reached a £ 7,931 crore.

AksHat Khetan, founder, AU Corporate Advisory and Legal Services, noted that the fifth amendment on the CIRP (Corporate Insolvency Resolution Process) regulations means a significant shift in the insolvency regime of India, making the resolution process transformed in a rooted trial.

“By drawing up proactive disclosure of avoidance transactions and limiting their inclusion in resolution plans after facto, the IBBI has ensured that the resolution is no longer a refuge for hidden obligations.

“This change reinforces the integrity of the process, protects the importance of bidders and strengthens the confidence of the creditor in the system,” said Khetan.

Published on July 7, 2025

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