The Insolvency and Bankruptcy Board of India (IBBI) has issued draft regulations requiring company founders who have guaranteed corporate loans to disclose their personal assets during bankruptcy proceedings.
Under the proposal, whether these promoters file for bankruptcy voluntarily or are forced to do so by their banks, they must now declare their ownership of crypto-assets, pension funds, any assets held abroad, as well as any beneficial ownership of assets not in their name.
The proposal comes from an expert panel of IBBI officials tasked with drafting new regulations under the Insolvency and Bankruptcy Code (IBC), as amended in the recently concluded Parliament session. The amendment awaits the presidential inauguration.
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A five-member committee headed by IBBI permanent member Jayanti Prasad issued the draft regulation based on a version of the bill tabled in Parliament last August and subsequent recommendations of a Lok Sabha select committee that reviewed it, the IBBI report said. Changes required by the final form of the bylaws will be incorporated when the regulations are promulgated.
A detailed list of personal guarantors’ assets disclosed leads to a better understanding of the nature of the bankruptcy, helps to get the right valuation and helps to reduce the deduction received by creditors in the resolution plan, explained Anoop Rawat, National Head of Insolvency and Restructuring at Shardul Amarchand Mangaldas & Co.
Figures from the IBBI showed that since the entry of personal guarantors under the IBC in December 2019, 4,386 applications had been filed by the end of December 2025. Of these, 662 were submitted to the guarantor with a debt amounting to almost ₹31,000 crore and 3,724 from creditors comprising debt of Rs ₹2.86 trillion.
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New rule
The disclosure is mandated by new Regulation 6A to be inserted into the IBBI (Insolvency Resolution Process for Personal Guarantor of Corporate Debtors) Regulations 2019.
According to them, a true and complete statement of the assets of the personal guarantor must be attached to the proposal for the resolution of personal bankruptcy, either by the personal guarantor himself or by the creditor.
“The list would include almost all assets that a person may hold and importantly, it also requires disclosure of assets over which the individual exercises control, influence or derives economic benefit, regardless of legal title,” explained Surendra Raj Gang, Partner, Business – Debt & Special Situations, Grant Thornton Bharat.
“Normally, personal guarantors would not hold assets in their own name and transfer them to relatives or friends, but they can retain indirect control, which is why this proposed change is very important and would allow a judicial authority to make an appropriate decision on all relevant information about a personal guarantor’s assets in a personal insolvency application,” Gang said.
Searching for better results
IBBI actively supports lenders to recover funds from promoters and reverse suspicious transactions made during the company’s financial downturn. By targeting these questionable deals that occur just before bankruptcy, the regulator aims to recover the diverted value and ensure better outcomes for creditors during the debt resolution process.
The move is significant because the sharp cuts suffered by banks and other lenders during the debt resolution have been a vulnerable point for the IBC and have drawn criticism.
Bankruptcy reforms, including the latest round of amendments, aimed to improve efficiency and prevent any abuse of the IBC process by promoters seeking to hide assets and escape payment obligations.
The committee’s 684-page report seeks to overhaul the regulatory framework as well as the various forms for stakeholders to use in debt resolution.
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