INSOLVENCY AND BANKRUPTCY BOARD OF INDIA

15th April, 2026

DISCUSSION PAPER ON PROPOSED AMENDMENTS TO THE IBBI (VOLUNTARY LIQUIDATION PROCESS) REGULATIONS, 2017

Background

Based on extensive deliberation and public consultations, proposals for amendments to the Code were finalized and the Insolvency and Bankruptcy Code (Amendment) Act, 2026 (Amendment Act) received the presidential assent on 06th April, 2026..

2. The Amendment Act contains several clauses proposing amendments to provisions of the Code, encompassing the corporate insolvency resolution process, liquidation process, voluntary liquidation process, pre-packaged insolvency resolution process, individual insolvency framework for personal guarantors to corporate debtors, creditor-initiated insolvency resolution process, information utilities, etc.

3. The Amendment Act reflects a clear legislative intent to strengthen the regulatory framework by expanding the scope of matters to be specified by the Insolvency and Bankruptcy Board of India (IBBI / Board) through regulations. The Amendment Act introduces both clarificatory amendments and substantive amendments. On examination of the Amendment Act, the Select Committee’s recommendations, the existing regulations were reviewed and amendments are proposed at various places.

4. The Insolvency and Bankruptcy Board of India (Voluntary Liquidation Process) Regulations, 2017 (hereinafter ‘the Regulations’) govern the voluntary liquidation of corporate persons under Chapter V of Part II of the Insolvency and Bankruptcy Code, 2016 (hereinafter ‘the Code’). This Discussion Paper sets out the key proposed regulatory changes, their present position, the proposed modifications, and the rationale therefor in light of the Amendment Act.

Key Proposed Regulatory Changes

5. The proposed regulatory amendments address five broad areas: (A) claims management, (B) termination of voluntary liquidation proceedings, (C) decoupling of forms from the Regulations, (D) consequential alignments arising from the omission of sections 38–42. Same are summarised below with the present position and rationale. A draft of amendment regulations is placed at Annexure 1.

A. Claims Management – Admission/Rejection

Present Position: Regulation 29(1) permitted the liquidator to admit or reject claims ‘as per Section 40 of the Code’. It did not require a written communication of the admission/rejection decision to stakeholders within a defined timeframe. Regulation 29(2) allowed a creditor to ‘appeal to’ the Adjudicating Authority against the liquidator’s decision ‘as per Section 42 of the Code’.

Proposed Change: Regulation 29 is amended as follows —

• The reference to ‘as per Section 40 of the Code’ is removed (Sections 38–42 being omitted by the Amendment Act), and a proviso is added requiring the liquidator to record in writing the reasons for rejection of any claim.
• A new sub-regulation (2) is inserted requiring the liquidator to communicate the decision on admission or rejection to the stakeholder within seven days of the decision.
• The word ‘appeal to’ is substituted with ‘approach’ in the provision governing a stakeholder’s recourse against the liquidator’s decision, and the reference to ‘section 42 of the Code’ is omitted.

Rationale: The omission of sections 38–42 by the Amendment Act necessitates removal of statutory references in the Regulations. The requirement for written reasons for rejection promotes transparency and accountability. The seven-day communication timeline provides certainty to claimants. The change from ‘appeal’ to ‘approach’ removes a reference to a specific appellate mechanism under the omitted Section 42, while preserving the stakeholder’s right to seek redress before the Adjudicating Authority.

B. Termination of Voluntary Liquidation Proceedings — New Regulation 42

Present Position: The Regulations had no mechanism for terminating a voluntary liquidation proceeding once commenced, prior to dissolution. A corporate person once entering voluntary liquidation had no regulatory pathway to exit the process even where circumstances changed (e.g., emergence of a business opportunity rendering continuation of liquidation commercially unwarranted).

Proposed Change: A new Regulation 42 is inserted, operationalising the new sub-sections (5A), (5B), and (5C) of Section 59, as follows —

• Sub-regulation (1): The special resolution for termination must specifically provide for — (a) rationale for termination; (b) treatment of liquidation costs; and (c) a declaration that the termination will not prejudicially affect the interest of any stakeholder.
• Sub-regulation (2): The liquidator is required to intimate the Adjudicating Authority with a report (in such form as notified through circular), confirming — (a) due process has been followed; and (b) the termination is not initiated to defraud any person and that the corporate person is solvent.
• Sub-regulation (3): The liquidator must, within seven days of the special resolution (or creditor approval where applicable), intimate both the Board and the Registrar of Companies, along with the report under sub-regulation (2).
• Sub-regulation (4): Upon termination under Section 59(5C), the liquidator’s appointment and term stand terminated; the liquidator ceases to exercise any powers or functions under the Regulations; and no further action is to be taken under the Regulations in respect of the voluntary liquidation proceedings.
• New Form J is introduced regarding termination of VL Proceedings which is annexed to this Discussion Paper (Annexure 2).

Rationale: The Amendment Act introduces a new exit mechanism for voluntary liquidation proceedings to address situations where continuing the process is no longer commercially or legally appropriate. Regulation 42 provides the procedural framework for this mechanism, ensuring safeguards against misuse (solvency declaration, non-fraud declaration, creditor protection, Adjudicating Authority intimation), prescribing timelines consistent with the statute (seven days for intimation), and defining the legal consequences of termination (cessation of the liquidator’s role and powers). The requirement to notify the Adjudicating Authority — though not explicitly mandated by the statute — serves as an oversight mechanism consistent with the Board’s regulatory objectives.

C. Decoupling of Forms from the Regulations — Migration to Circular

Present Position: Six forms (Forms A through F of Schedule I) are prescribed within the Regulations themselves, requiring a formal amendment to the Regulations for any modification to the forms.

Proposed Change: References to Forms A to F of Schedule I in Regulations 14(1), 16(1), 17(1), 18(1), 18(2), and 19(1) are substituted with ‘such form as notified by the Board through circular’. Similarly, Form H (Regulation 38(3)) and Forms G and I (Regulation 39) are also migrated to circular notification. Schedule I is substituted with a revised Schedule I containing only the accounting registers and books (Cash Book, General Ledger, Bank Ledger, etc.), which are of a more permanent nature.

No change is suggested in the content of the present Forms except consequential changes (placed at Annexure 3).

Rationale: Migrating forms to circulars —

• Enable faster, more responsive updates to forms;
• allows forms to evolve with technology and operational practice without triggering a formal amendment process; and
• is consistent with a broader regulatory policy of retaining only essential structural provisions in parent Regulations while delegating operational details to subordinate instruments.

D. Consequential Amendments arising from Omission of sections 38–42

The Amendment Act omits sections 38 to 42 of the Code, which had governed consolidation, verification, admission/rejection and determination of value of claims during the liquidation process.

These provisions applied to voluntary liquidation by virtue of section 59(6). Consequentially:

• Regulation 29(1): Reference to ‘as per section 40 of the Code’ is removed. The liquidator’s power to admit or reject claims is now provided in the Regulations themselves.
• Regulation 29(3): Reference to ‘as per section 42 of the Code’ (appeal against liquidator’s decision on claims) is omitted. The recourse is reformulated as the right to ‘approach’ the Adjudicating Authority, preserving the substantive right while removing the defunct reference.
• Regulation 12 —The marginal heading of Regulation 12 is changed from ‘Consultation with stakeholders’ to ‘Assistance by stakeholders’, and the words ‘consulted under section 35(2)’ are omitted in line with the amendments proposed in the Amendment Act.

6. Public comments: The Board accordingly solicits comments on the proposals discussed above and the draft regulations proposed above. After considering the comments, the Board proposes to make regulations under clauses (aa) and (t) of sub-section (1) of section 196 read with section 240 of the Code.

The process for submission of comments is provided at Page 18.

7. The last date for submission of comments is 28th April, 2026.

Annexure 1

Draft Gazette Notification — IBBI (Voluntary Liquidation Process) (Second Amendment) Regulations, 2026

Voluntary liquidation amendments streamline claims handling, add termination mechanics, and shift operational forms to circular-based notification. Proposed amendments to the IBBI (Voluntary Liquidation Process) Regulations, 2017 align the framework with the Insolvency and Bankruptcy Code (Amendment) Act, 2026 by revising claims management, introducing a mechanism for termination of voluntary liquidation proceedings, and migrating operational forms to circular-based notification. The liquidator must record reasons for rejection of claims, communicate admission or rejection within seven days, and the stakeholder may approach the Adjudicating Authority. Termination requires a special resolution, supporting report, regulatory intimation, and cessation of the liquidator's powers.