IBBI Mandates Beneficial Ownership and Section 32A Disclosure in Resolution Plans

Notification No. F. No. IBBI/2025-26/GN/REG133., Dated 22.12.2025

For years, the Indian insolvency landscape has wrestled with a ‘shadow’ problem – Who is really behind the wheel? While the Insolvency and Bankruptcy Code (IBC) was designed to rescue distressed assets, it occasionally faced the risk of being gamed by opaque structures or ineligible entities hiding behind complex layers of shell companies. Without knowing the ‘Ultimate Beneficial Owner’ (UBO), the system remained vulnerable to back-door entries by unscrupulous promoters or entities that shouldn’t legally be at the table.

To address these gaps in accountability and eligibility, the Insolvency and Bankruptcy Board of India (IBBI) issued a critical update on December 22, 2025. The Seventh Amendment Regulations, 2025, marks a significant shift toward absolute transparency in the resolution process.

1. The Core Mandate – What has Changed?

The amendment introduces two mandatory requirements for every resolution plan submitted under Regulation 38:

• The Beneficial-Ownership Statement – Resolution applicants must now provide a detailed statement disclosing all natural persons who ultimately own or control the applicant. This includes a complete map of the shareholding structure and the jurisdiction of every intermediate entity involved.
• Section 32A Eligibility Affidavit – Applicants must provide a formal affidavit stating whether they are eligible for the benefits of Section 32A of the Code. This section typically provides immunity to the corporate debtor and its assets from prior offenses, provided there is a change in management to an unrelated party.
  

  2. Impact – Why This Matters

This amendment isn’t just a paperwork exercise; it is a strategic move to fortify the integrity of the IBC.

1. Stripping Away the Corporate Mask – By demanding the details of the ‘natural persons’ at the top of the chain, the IBBI is effectively ending the era of anonymous bidding. Resolution Professionals (RPs) and the Committee of Creditors (CoC) can now see exactly who is funding the rescue, ensuring that the spirit of Section 29A (which bars certain ineligible persons from bidding) is upheld.
2. Jurisdictional Clarity – Requiring the disclosure of jurisdictions for intermediate entities is a direct hit at tax havens and ‘round-tripping’. It allows regulators to track if funds are being routed through questionable corridors, bringing the IBC in line with global Anti-Money Laundering (AML) standards.
3. Streamlining Section 32A Immunity – The requirement for a specific affidavit regarding Section 32A forces applicants to be upfront about their legal standing. This prevents future litigation where the ‘clean slate’ principle might be challenged because the new management was secretly related to the old, defaulting promoters.

3. Conclusion

With these regulations coming into force immediately upon their publication in the Official Gazette, the IBBI has sent a clear message – The privilege of acquiring a distressed asset comes with the price of total transparency. For investors, this means more due diligence; for the Indian economy, it means a cleaner, more robust insolvency framework.

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