Enhancing Accountability: Evolving Liability Of Personal Guarantors Under Insolvency Bankruptcy Code, 2016

Introduction

A personal guarantor is an individual who provides surety under contract of guarantee to secure the obligations of a borrower. Personal guarantors play a pivotal role in securing loans for businesses and facilitating economic activities. The liability pertaining to the personal guarantors under Insolvency Bankruptcy Code, 2016 (hereinafter referred to as the "IBC") has evolved significantly with the legal framework extending its reach to bring the personal guarantors at a similar pedestal as the corporate debtors. This significant shift has brought in an additional layer of protection to the creditors while severely limiting the rights available to the personal guarantors. Through this article, we delve into the transformative journey of liability of the personal guarantors along with exploring the key changes and case laws that have been instrumental in framing the current position of the insolvency laws for personal guarantors.