The Insolvency and Bankruptcy Code (Amendment) Act, 2026 marks a significant evolution in India’s insolvency framework, promising faster resolutions and improved efficiency. But a key question remains: do these changes meaningfully benefit debtors and smaller stakeholders such as MSMEs, suppliers, and employees? 

According to Saloni Kothari, Partner and Group General Counsel at BDO India, the answer is nuanced. The amendments do offer “tangible” benefits, but largely indirect ones. 

At the core of the reform is an effort to compress resolution timelines. By reducing delays, the amended framework aims to preserve enterprise value, which has historically eroded during prolonged insolvency proceedings. This, in turn, can improve recoveries across the creditor spectrum, including smaller stakeholders who often find themselves at the bottom of the repayment hierarchy. 

Kothari says a notable positive for small businesses is the provision allowing MSME promoters to bid for their own firms. “Earlier, promoters of defaulting companies were largely barred from regaining control. The new framework provides a second chance—provided they submit a credible and workable resolution plan. This is particularly relevant for enterprises pushed into distress due to external economic shocks rather than deliberate mismanagement.” 

However, the benefits are not evenly distributed. Kothari points out that the newly introduced Creditor-Initiated Insolvency Resolution Process (CIIRP) is accessible primarily to large financial creditors such as banks. Smaller stakeholders—like operational creditors, vendors, and employees—will still have to rely on the existing Corporate Insolvency Resolution Process (CIRP), which remains comparatively slower and more litigation-prone. 

Why the reforms were necessary 

Nearly a decade after the IBC was introduced in 2016, several structural challenges had become evident. Delays in admitting cases, protracted litigation, and interpretational ambiguities often led to significant value erosion even before the resolution process began in earnest. 

These concerns were also flagged by Finance Minister Nirmala Sitharaman, who noted that bottlenecks at the admission stage were undermining the very objective of time-bound resolution. 

Another persistent issue has been the ambiguity around the treatment of government dues, particularly whether they should rank alongside secured creditors. This lack of clarity has triggered repeated disputes, weakening predictability for lenders and bidders alike, says Kothari. 

Further, the absence of clear frameworks for cross-border and group insolvency cases has limited India’s appeal to global investors, who typically seek well-defined and comprehensive resolution mechanisms. 

Key changes introduced 

The IBC Amendment 2026 introduces a set of structural reforms aimed at addressing these longstanding gaps: 

Creditor-Initiated Insolvency Resolution Process (CIIRP): Allows select financial creditors to initiate insolvency while permitting existing management to continue under supervision. 

Mandatory admission of cases: The National Company Law Tribunal is now required to admit cases once a default is established, removing discretionary delays. 

• Group and cross-border insolvency frameworks: Formal mechanisms to handle complex, multi-entity and international cases. 

The amendment, passed by both the Lok Sabha and the Rajya Sabha, also introduces provisions for out-of-court resolution, further expanding the toolkit available to creditors. 

What is the impact on the resolution ecosystem? 

Taken together, these reforms are expected to make insolvency proceedings faster, more predictable, and less prone to litigation, Kothari says. “By enforcing strict admission timelines and narrowing the scope for rejection, the amendments directly address one of the biggest causes of value erosion in the system,” she mentions. 

The framework also seeks to strike a balance between accountability and investor confidence. Once a resolution plan is approved, the incoming acquirer is granted a “clean slate,” free from past liabilities. At the same time, previous promoters remain liable for any misconduct, ensuring that the system does not incentivise wrongdoing, as per Kothari. 

Importantly, the introduction of cross-border insolvency mechanisms aligns India’s framework more closely with global best practices. This is expected to enhance investor confidence and improve recovery outcomes over time. 

While the IBC Amendment may not directly empower smaller stakeholders in every aspect, it creates a more efficient and value-preserving system that benefits them indirectly. Faster resolutions, improved recoveries, and a more predictable process could collectively narrow the gap between large financial creditors and smaller participants. 

However, the continued exclusion of smaller stakeholders from faster mechanisms like CIIRP highlights that the journey towards a fully inclusive insolvency framework is still a work in progress.