The Insolvency and Bankruptcy Board of India (IBBI) has recently implemented significant changes in the realm of insolvency resolution, specifically concerning personal guarantors to corporate debtors. These modifications, as outlined in the amended Personal Guarantors to Corporate Debtors Regulations 2019, came into effect on January 31. One noteworthy adjustment pertains to the lifting of restrictions on appointing a single Insolvency Professional (RP) for managing the resolution process of both a company. and its associated personal guarantors. This decision aims to enhance coordination and cooperation between these interconnected processes.

Mandatory Creditor Meetings:– One of the pivotal changes introduced by IBBI involves making creditor meetings mandatory in the context of personal guarantors facing insolvency. Previously, after the submission of a payment plan by the personal guarantor, the resolution professional would assess its feasibility and present a report to the adjudicating authority. This report would include a recommendation on whether a meeting of creditors should be convened. However, with the recent amendment, IBBI has mandated the inclusion of creditors in the resolution process for personal guarantors.

Rationale for the Amendment:- The rationale behind this amendment is rooted in recognizing the complexities often associated with cases involving personal guarantors. Unlike less complex cases where frequent creditor meetings might not be mandatory, personal guarantor cases often involve intricate financial interdependence and multiple creditors. As a result, additional due diligence becomes necessary. The amendment aligns with IBBI’s commitment to fostering a comprehensive and collaborative approach to the resolution process.

Role of Resolution Professionals:- Resolution professionals play a crucial role in overseeing the operations of distressed companies during insolvency proceedings. They facilitate coordination among the committee of creditors, the adjudicating authority, and potential bidders. The initial provision allowing discretion in calling creditor meetings was designed to expedite the resolution of less complex cases. However, IBBI’s recent amendment recognizes the unique challenges presented by personal guarantor cases, necessitating a mandatory inclusion of creditors to ensure a thorough and collaborative resolution process.

The recent amendments made by IBBI in the Personal Guarantors to Corporate Debtors Regulations 2019 signify a strategic move towards streamlining and fortifying the insolvency resolution process. By lifting restrictions on the appointment of a single Insolvency Professional for both the company and its personal guarantors and making creditor meetings mandatory in personal guarantor cases, IBBI aims to promote better coordination and effectiveness in achieving desired results. These amendments underscore IBBI’s commitment to upholding fairness in the insolvency resolution system and addressing the unique challenges posed by cases involving personal guarantors.