IBBI recent amendment to strengthen IRPs in India
In a big move to strengthen norms for the Insolvency Resolution Professionals (IRP‘s), the governing body for the Insolvency Professionals, the ‘Insolvency and Bankruptcy Board of India (herein referred to as ‘the Board’) has notified amendments to the (i) the Insolvency and Bankruptcy Board of India (Insolvency Professional) Regulations, 2016 and (ii) the Insolvency and Bankruptcy Board of India (Model Bye-Laws and Governing Board of Insolvency Professional Agencies) Regulations, 2016.
Insolvency resolution professionals are professionals registered with the IBBI to perform the liquidation and recovery process for individuals debtors, companies and limited liability partnerships. The professionals play a key role in disbursing dues to all forms of creditors and pay out liabilities as per the Insolvency and Bankruptcy Code. Over the last two years, demand for RPs have soared in the country in line with the government’s action to quickly resolve pending bankruptcy cases.
The salient amendments effected by the Insolvency and Bankruptcy Board of India (Insolvency Professionals) (Amendment) Regulations, 2019 are:
a) An insolvency professional shall not accept or undertake any assignment as interim resolution professional, resolution professional, liquidator, bankruptcy trustee, authorized representative or in any other role under the Insolvency and bankruptcy Code, 2016 unless he holds an ‘Authorization for Assignment’ issued by his Insolvency Professional Agency. This is effective from 1st January, 2020.
b) An insolvency professional shall not engage in any employment when he/she holds an ‘Authorization for Assignment’ or when he/she is undertaking an assignment. This would enable a professional to seek registration as an insolvency professional even when he is in employment. He must, however, he/she discontinue employment when he wishes to have an Authorization for Assignment. He may surrender ‘Authorization for Assignment’ when he/she wishes to take up employment.
c) Where an insolvency professional has conducted a Corporate Insolvency Resolution Process (CIRP), he/she or his/her relatives shall not accept any employment, other than an employment secured through open competitive recruitment, with, or render professional services, other than services under the Code to a creditor having more than ten percent voting power, the successful resolution applicant, the corporate debtor or any of their related parties, until a period of one year has elapsed from the date of his/her cessation from such process.
d) An insolvency professional shall not engage or appoint any of his relatives or related parties, for or in connection with any work relating to any of his/her assignment.
The salient amendments effected by the Insolvency and Bankruptcy Board of India (Model Bye-Laws and Governing Board of Insolvency Professional Agencies) (Amendment) Regulations, 2019 are:
a) An Insolvency Professional Agency shall issue/renew an ‘Authorization for Assignment’ to insolvency professionals in accordance with its Bye-laws.
b) subject to meeting other requirements, an insolvency professional shall be eligible to obtain an ‘Authorization of Assignment’ if he has not attained the age of seventy years.
c) Subject to meeting other requirements, the maximum age for serving as an independent director on the Governing Board of an Insolvency Professional Agency has been increased up to the age of seventy-five years.