Overview: The Insolvency and Bankruptcy Board of India (IBBI) has proposed four safeguards for the insolvency resolution process of personal guarantors to corporate debtors. The proposals seek to address related-party voting, examination of specified transactions, independent valuation of the guarantor’s assets and recording of creditors’ deliberations on repayment plans. The discussion paper was published on the 12th September, 2026, with public comments invited until the 3rd October, 2026. The proposals are not yet final regulations.
The Insolvency and Bankruptcy Board of India (IBBI) has proposed tighter safeguards for insolvency proceedings involving personal guarantors to corporate debtors, with a particular focus on how creditors vote on repayment plans and how the guarantor’s financial position is assessed.
The proposals seek to bring greater procedural clarity to an area of personal insolvency where questions around related-party influence, asset disclosure and transactions affecting creditor recovery can become significant.
The timing also comes amid increased attention on high-value personal-guarantor cases before the NCLT. In the Subhash Chandra matter, the tribunal had approved a repayment plan providing ₹6.25 crore to creditors against admitted claims of ₹22,006.57 crore. A five-member NCLT bench subsequently stayed that order after finding that the earlier proceedings had not produced a clear majority view.
The IBBI discussion paper does not attribute its proposals to any particular case. Instead, it points to gaps in the existing framework and proposes additional safeguards for the personal-guarantor insolvency process. Stakeholders have until the 3rd October, 2026, to submit comments.
What Is IBBI Proposing?
Chapter III of Part III of the Insolvency and Bankruptcy Code, 2016, provides the framework for the insolvency resolution process of personal guarantors to corporate debtors. The IBBI has proposed changes in four key areas.
1. Related-Party Creditors to Get Nil Voting Share
The IBBI proposes that a creditor who is a related party of the personal guarantor, within the meaning of Section 5(24A) of the IBC, should be assigned a Zero voting share in relation to the repayment plan.
The proposed framework would also require the list of creditors to separately identify whether a creditor is a related party of the guarantor. The objective is to prevent a creditor connected with the guarantor from influencing the approval of the repayment plan.
2. Specified Transactions to Come Under Closer Scrutiny
The IBBI has proposed that the Resolution Professional, appointed under the Insolvency and Bankruptcy Code (IBC), should examine specified transactions during the insolvency resolution process of the personal guarantor.
The proposed framework covers preferential transactions, undervalued transactions, transactions defrauding creditors and extortionate credit transactions. The findings would be reported to creditors before they take a decision on the repayment plan.
The move is significant because such transactions can affect the assets ultimately available to creditors and the assessment of the guarantor’s financial position.
3. Independent Valuation of the Guarantor’s Assets
Another proposal is to introduce a formal valuation exercise for the personal guarantor’s assets.
A registered valuer would determine the fair value and realisable value of the assets. This would give creditors a more reliable basis for assessing the repayment plan and comparing the proposed recovery with what may potentially be available from the guarantor’s assets.
4. Creditors to Record Their Deliberations and Reasons
The IBBI has also proposed that creditors record their deliberations and reasons when deciding whether to approve or reject a repayment plan.
This would create a clearer record of the basis on which creditors reached their decision, particularly where the proposed repayment differs substantially from the admitted claims or where competing recovery options are available.
Why These Changes Matter
The proposed safeguards are aimed at improving the information available to creditors before they vote on a repayment plan.
At present, the personal-guarantor process does not contain a corresponding obligation requiring the Resolution Professional to examine certain avoidance transactions before the repayment plan is considered. The IBBI discussion paper seeks to address this gap and bring greater scrutiny to transactions that could affect the value available to creditors.
The proposal on related-party voting is another important aspect. By giving such creditors a Nil voting share and requiring their status to be separately disclosed in the creditor list, the IBBI intends to make the voting process more transparent.
Independent asset valuation would address another practical question: what is the guarantor actually capable of paying? The fair and realisable values would help creditors assess the repayment plan against the assets available and the possible outcome if the resolution process does not succeed.
Subhash Chandra Case Impact
The recent proceedings involving Essel Group founder Subhash Chandra illustrate why repayment plans in personal-guarantor insolvency can attract close scrutiny.
The NCLT had approved a plan under which ₹6.25 crore was to be paid to creditors against admitted claims of ₹22,006.57 crore. The approval was subsequently stayed by a five-member special bench, which found that there was no clear majority view emerging from the earlier proceedings. The larger bench also restrained Chandra from directly or indirectly alienating his properties while the matter is considered further.
The case should not, however, be treated as the reason for the IBBI’s proposals. The discussion paper sets out the regulatory gaps identified by the Board and proposes safeguards intended to strengthen the personal-guarantor resolution process more broadly.
What Happens Next?
The IBBI has invited stakeholders to submit comments on the discussion paper and draft regulatory amendments by the 3rd October, 2026. The Board will consider the feedback before deciding whether and in what form the proposed amendments should be introduced.
Until the final regulations are notified, the proposed safeguards do not constitute binding requirements for personal guarantors, creditors or Resolution Professionals.
FAQs:
Are the new IBBI personal-guarantor rules currently in force?
What is the proposed voting rule for related-party creditors?
Which transactions would the Resolution Professional examine?
The proposal covers specified transactions, including preferential, undervalued, transactions defrauding creditors and extortionate credit transactions. The purpose is to identify transactions that could affect the value available to creditors or the completeness of the guarantor’s financial disclosure.
Why is asset valuation being proposed for personal guarantors?
The proposal would introduce valuation of the guarantor’s assets by a registered valuer, including their fair value and realisable value. This can give creditors a clearer basis for assessing the repayment plan and the potential recovery available from the guarantor’s assets.
SetIndiaBiz Support
Personal-guarantor insolvency and restructuring matters often involve multiple layers of corporate records, financial documentation, regulatory filings and NCLT/IBC-related processes. For promoters, companies and stakeholders dealing with these requirements, maintaining accurate documentation and ensuring that corporate records are properly aligned can be critical.
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The IBBI’s proposed safeguards could bring greater transparency to personal-guarantor insolvency, particularly around creditor voting, asset valuation and transactions that may affect recovery.
For now, however, the proposals remain under consultation. The next significant step will be the IBBI’s consideration of stakeholder comments received by 3 October 2026, followed by any final amendments to the applicable regulations.
In This Article
Author Bio
Setindiabiz Editorial Team is a multidisciplinary collective of Chartered Accountants, Company Secretaries, and Advocates offering authoritative insights on India’s regulatory and business landscape. With decades of experience in compliance, taxation, and advisory, they empower entrepreneurs and enterprises to make informed decisions.
