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IBC Amendment Bill 2025 can prove to be a big game-changer for companies, investors and cases stuck in the insolvency process. If the government makes changes in Section 29A, then the pace of corporate restructuring will increase in the coming years.
New Delhi. The government is considering making amendments in the Insolvency and Bankruptcy Code (IBC). Many important reforms have taken place in IBC since its implementation in 2016. Now the government is going to amend Section 29A of the IBC, which prevents the promoter of a company or his blood relatives from participating in the insolvency process of the company. The government is preparing to present the IBC Amendment Bill 2025 in Parliament in this winter session. Changes will be made in Section 29A through this bill.
The proposal to amend the IBC is currently being considered by the Select Committee headed by Baijayant Panda. The committee is seeking the opinions of all the stakeholders. Many people have expressed their views before the committee to redefine the “blood relation” part of Section 29A and change the definition of “related party”. This change will increase the number of investors participating in the insolvency process, improve the chances of resolution and create better solutions for bankrupt companies.
What does section 29A say?
Section 29A of IBC decides who can and who cannot bid for an insolvent company. Under this rule, the promoter of a company and his blood relations (like parents, siblings, children etc.) cannot take part in the resolution process of the company. The aim of the government was to ensure that the company in poor financial condition was not handed over to its own promoter or family.
But in the last few years, this provision proved to be so strict that many people who had no business relation with the company also came under this rule. Only because of family ties they were excluded from bidding, whereas they could have helped in restructuring the company.
Why did the demand arise to change this rule?
Industry and corporate law experts say that the definition of Section 29A is very broad. With this, such relatives who have nothing to do with the operations, finances or management of the company are also considered “related parties”. He says that if a person is just a relative but is not associated with the business, then it is not appropriate to exclude him just because of blood relation. The real investigation should be into the source of funding. That is, the industry wants the actual financial connection, not the relationship, to determine the rules.
Supreme Court decision
The supporters of amendment in Section 29A are saying that the Supreme Court had also said in one of its old orders that the definition of related party should be decided only on the basis of business relationship and not on family relationship. Therefore, this amendment will be the right step from all three points of view: logic, law and practice.
