IBBI makes detailed disclosure of carry-forward losses in insolvency process mandatory

The IBBI has mandated insolvency professionals to disclose details of carry-forward losses under the Income Tax norms in the information memorandum prepared during the insolvency process. In a circular issued on Monday, the Board said all Information Memorandum(s) must contain a dedicated section detailing the quantum of losses available for carry forward under the Income Tax Act, 1961.

"The Insolvency and Bankruptcy Board of India (IBBI) had amended regulation 36 of the IBBI (Insolvency Resolution Process for Corporate Persons) Regulations, 2016 (CIRP regulations) to mandate the disclosure of carry forward of losses as per the Income Tax Act, 1961, in the Information Memorandum (IM)," the circular said.

The Board further said the Insolvency professionals were also advised to ensure comprehensive capture of details related to carry forward losses and the disclosure thereof.


After a recent review of IMs, the regulator observed inconsistencies, prompting them to issue fresh directions.

As per the Board, the dedicated section on carry forward losses must prominently highlight four key aspects -- the total quantum of such losses, a breakdown under specific heads as per tax laws, the applicable time limits for their utilisation, and an explicit statement if no such losses are available to the corporate debtor.

"This enhanced disclosure framework is intended to provide potential resolution applicants with a more comprehensive understanding of the corporate debtor's financial position, enabling them to develop more informed and viable resolution plans while considering the benefits of carry forward losses," the IBBI stated.