The insolvency regulator has directed insolvency professionals to strengthen due diligence to prevent the misuse of the insolvency resolution framework for purposes unrelated to genuine insolvency proceedings. The regulator said it had received information from law-enforcement and other regulatory agencies indicating that, in some cases, the insolvency framework may be used to mitigate tax liabilities or facilitate the closure of companies without adequate regulatory scrutiny. The Insolvency and Bankruptcy Code (IBC) is intended to provide a time-bound and market-driven mechanism for resolving financially stressed companies and maximising the value of their assets. The regulator has advised insolvency professionals to carefully examine the circumstances surrounding insolvency cases and ensure that proceedings are being undertaken for legitimate resolution or liquidation purposes. The directive also emphasises the importance of reviewing financial transactions, liabilities, corporate arrangements and other relevant information before and during the insolvency process. Stronger due diligence is expected to help identify potential misuse, improve transparency and protect the interests of creditors and other stakeholders. The regulator's move highlights the need for greater accountability within the insolvency ecosystem and aims to ensure that the IBC remains focused on resolving genuine financial distress rather than being used to bypass statutory or regulatory obligations.