IBBI proposes removal of Clause 6 restricting IPs from acquiring debtor assets

Discussion Papers; Dated: 12.08.2025

Introduction to the Proposal
The Insolvency and Bankruptcy Board of India (IBBI) has released a discussion paper proposing the deletion of Clause 6 from the Code of Conduct for Insolvency Professionals. This clause currently imposes restrictions on insolvency professionals (IPs) and their relatives from acquiring assets of a debtor during liquidation or bankruptcy proceedings, except under certain conditions.

Current Restrictions under Clause 6
As per the existing provision, an IP or their relative may only acquire such assets if they can demonstrate that their objectivity and independence in the insolvency process are not compromised. Additionally, the acquisition requires explicit prior approval from the IBBI. These safeguards were originally designed to prevent conflicts of interest and protect the integrity of the insolvency process.

Rationale for Proposed Deletion
The IBBI has suggested that Clause 6 may no longer be necessary in its current form, as similar safeguards and prohibitions are already embedded in other applicable regulations and ethical guidelines. Removing the clause would help eliminate regulatory duplication, reduce ambiguity, and make the Code of Conduct simpler and more consistent with other governing provisions.

Expected Impact and Next Steps
If adopted, the deletion is expected to harmonize the Code of Conduct with broader insolvency regulations, making compliance easier for professionals without compromising transparency or ethical standards. The discussion paper invites stakeholder feedback, which will be considered before finalizing any amendments to the Code.

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