IBC reform: Insolvency set to get a new lift
Oct 2, 2022
Synopsis
In a significant policy shift, the IBBI on Friday took the first step towards institutionalisation of the profession of Insolvency Professional (IP) by amending the regulations incorporated and enacted in 2016.
Bankruptcy proceedings are set to get a shot in the arm after the Insolvency and Bankruptcy Board of India (IBBI) permitted insolvency professional entities (IPEs) to act as individual resolution professionals. The move is likely to bring in more domain expertise to distressed asset resolutions in a time-bound manner while facilitating value maximisation of assets and paving the way for foreign entities to enter the Indian market.
In a significant policy shift, the IBBI on Friday took the first step towards institutionalisation of the profession of Insolvency Professional (IP) by amending the regulations incorporated and enacted in 2016.
“This amendment of institutionalising the profession creates a fertile ground for the betterment of practices of the insolvency professionals for meeting the objectives of the Code,” said Anil Goel, founder of AAA Insolvency Professionals. “The move should facilitate in value maximisation of any complex case.”
The IBBI allowed an IPE to be registered as an IP, which is an individual, to carry on the activity of such professionals under the Insolvency and Bankruptcy Code (IBC).
“The board has considered it appropriate to enable the Insolvency Professional Entity (IPE) recognised by the board to carry on the activities of an IP,” the IBBI said in a statement.
Until recently, only individuals were permitted to register as insolvency professionals under the IBC, which mandates a stressed asset resolution within 333 days. However, complexities in the code sometimes made it an arduous task for a single individual to carry out everything, particularly in big cases involving thousands of crores.
With the latest move, an individual acting on behalf of any large consultant in any particular bankruptcy case can get into another matter while his or her colleague can step in.
“This move will bring in more expertise to resolve an insolvency case more logically," said Abizer Diwanji, head - financial services at EY. “This is also in line with global bankruptcy trends paving the way for more international insolvency professional entities coming to India."
Banks and financial institutions are said to have raised the subject with the IBBI, citing complexities of ongoing large cases. Banks are likely to prefer IPEs in such cases as it helps establish better governance framework.
“In my understanding the creditors will continue to appoint individual IPs for small cases and prefer big IPEs for the purpose of multi-disciplinary expertise,” said Goyal.
The amendment has been allowed supposedly considering the limitations of an IP, being an individual, in dealing with processes under the code that requires concurrent efforts and multi-disciplinary expertise
“It is a move that is likely to help in a speedier resolution process,” said a banker, who did not wish to be identified.
As per the amendment, an IPE, recognised by the board, can seek registration as an IP with the board by making an application in the specified form along with a non-refundable application fee of Rs 2 lakh.
[The Economic Times]
