IBC Amendment Act 2026 Bars Resolution Professionals From Acting As Liquidators

(MENAFN- KNN India) New Delhi, Apr 14 (KNN) Resolution professionals (RPs) have been barred from being appointed as liquidators for the same company where a resolution plan has been rejected, as per newly enacted Insolvency and Bankruptcy Code (IBC) Amendment Act 2026.

The IBC Amendment Bill 2026 which was passed by the Parliament recently received the President's assent last week.

The move marks a significant shift from the earlier proposal, where disqualification was linked to specific lapses under Section 30(2). The final law expands this restriction, prohibiting RPs from taking up the role of liquidator for the same entity under any circumstances.

New Appointment Mechanism for Liquidators

The Act also introduces a revised process for appointing liquidators. Instead of the committee of creditors (CoC) recommending a name, the adjudicating authority (AA) will now refer the matter to the Insolvency and Bankruptcy Board of India (IBBI), which must propose an insolvency professional within 10 days.

This change is aimed at ensuring greater independence and transparency in the liquidation process.

Experts See Reduced Conflict of Interest

Legal and industry experts said the amendment clearly separates the roles of resolution professionals and liquidators, reducing potential conflicts of interest.

Prateek Kumar, Partner, Khaitan & Co was quoted by Financial Express as saying,“This step would disincentivise RPs from putting a company into liquidation as they will not have a role to play at the liquidation stage."

The newspaper also quoted Srinivasa Rao, Senior Partner (risk advisory), Nangia Global who noted,“The automatic disqualification of an RP from being appointed as liquidator of the same matter eliminates any hint of conflict, thereby guaranteeing neutrality and independence."

Shift from Criminal Liability to Civil Penalties

In another key change, the Act replaces certain criminal liabilities with civil penalties. While provisions under Sections 74 and 76 of the original code remain, new Sections 67B and 67C introduce monetary penalties for specific violations.

Section 67B covers breaches of moratorium conditions or approved resolution plans, with penalties of up to Rs 2 crore. Section 67C applies to operational creditors who conceal disputes or repayments while initiating insolvency proceedings, with penalties ranging from Rs 1 lakh to Rs 2 crore.

Kumar emphasised that“this dilution will give RPs the freedom to function without the threat of harsh consequences,” marking a departure from earlier provisions that included stricter criminal consequences.

(KNN Bureau)

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