Govt relaxes insolvency rules for MSMEs

New Delhi: The government has notified changes to the Insolvency & Bankruptcy Code, easing rules for resolution in micro, small, and medium enterprises (MSMEs), while tightening conditions to prevent conflicts of interest in pre-packaged insolvency resolution.

The Insolvency and Bankruptcy Board of India (Liquidation Process) (Third Amendment) Regulations, 2026, mandates the appointment of only one registered valuer per asset class for MSMEs, reducing the administrative and financial burden, unless the committee formally justifies the need for two.

A separate notification on the Insolvency and Bankruptcy Board of India (Pre-Packaged Insolvency Resolution Process) (Second Amendment) Regulations, 2026 introduced strict restrictions on who can be appointed as a registered valuer to prevent conflicts of interest. It explicitly prohibits appointing related parties of the corporate debtor, recent auditors (within the past five years) and any partners, directors, or relatives connected to the resolution professional's entity.