IBBI Proposes Changes To Framework For Insolvency Professional Entities, Invites Public Comments Till 11th November 2023

The Insolvency and Bankruptcy Board of India (“IBBI”) on 20.10.2023 has published a Discussion Paper on “Rationalisation of the Regulatory Framework for Enhancing the Effectiveness of Insolvency Professional Entities in Insolvency Resolution Process”. The IBBI has also invited comments from the public/stakeholders regarding proposed changes to the framework pertaining Insolvency Professional Entities (“IPE”). The comments can be submitted online at www.ibbi.gov.in till 11.11.2023. The Discussion Paper primarily proposes changes to (i) Monitoring of IPE acting as IP; (ii) Related Party Definition for an IPE acting as IP; (iii) Restriction on Number of Assignments by an IP; and (iv) Minimum Fee Structure of an IPE acting as IP. Proposed Changes ISSUE 1: Monitoring of IPE acting as IP In case of contravention by the IPE acting as IP, the disciplinary proceeding shall be initiated against the IP who is/has been its authorised signatory for respective assignment(s). Upon initiation of disciplinary proceeding against such IP, the IPE shall not allow him/her to act as authorised signatory in any new assignment. Such action would not impact the ongoing assignment or status of AFA of the IPE acting as IP or its other partners or directors, as they are separate legal entity from the authorised signatory. If there are repeated instances of contravention or disciplinary proceeding against one or more partners or directors of the IPE acting as IP, the disciplinary proceeding may also be initiated against the IPE acting as IP on a case-to-case basis. However, such action would not impact the status of AFA of other partners or directors of the IPE ISSUE 2: Related Party Definition for an IPE acting as IP To meet the intended objective of making use of potential institutional and multidisciplinary structure of IPEs, the partner or director of the IPE acting as IP may be excluded from the definition of related party for the purposes of clauses 23B and 23C of Code of Conduct specified in IP Regulations, except for the services related to valuation and auditing. ISSUE 3: Restriction on Number of Assignments by an IP It is proposed that clarification under clause 22 of Code of Conduct specified in IP Regulations may be modified to include following: - For IP who is an individual - Overall limit of 10 assignments at any point of time, out of which not more than three shall have admitted claims exceeding one thousand crore rupees each. The overall limit includes all the assignments of an IP. For IP which is an entity - Overall limit of 5 assignments per partner or director who are IPs holding AFA, at any point of time (excluding the assignments taken by an IP in his individual capacity). However, number of assignments for an IPE acting as IP at any point of time shall not be more than 15 assignments having admitted claims exceeding one thousand crore rupees each. The overall limit includes all the assignments of an IPE acting as IP. ISSUE 4: Minimum Fee Structure of an IPE registered as IP It is proposed to clarify that the existing fee structure is applicable for individual IP only and shall not be applicable in case of IPE acting as IP. Public Comments Invited The IBBI has invited comments on the aforementioned proposals above and draft amendments to IBBI (Insolvency Professionals) Regulations, 2016, IBBI (Insolvency Resolution Process for Corporate Persons) Regulations, 2016 and IBBI (Inspection and Investigation) Regulations, 2017, which are annexed to the Discussion Paper. After considering the comments, the IBBI proposes to make regulations under Section 196, 207, 208, 217, 218, 219, 220 read with Section 240 of IBC. Comments may be submitted electronically by 11th November 2023 on official website of IBBI at www.ibbi.gov.in Click Here To Read/Download Invitation

IBBI Proposes Changes To Framework For Insolvency Professional Entities, Invites Public Comments Till 11th November 2023

Pallavi Mishra

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