IBBI rationalises regulatory framework for insolvency professional entities

Regulator IBBI has taken measures to rationalise the regulatory framework for insolvency professional entities as well as facilitate efficient implementation of processes by insolvency professionals. The Insolvency and Bankruptcy Board of India (IBBI) has provided clarity on disciplinary proceedings, applicability limit on number of assignments and fee structure with respect to an Insolvency Professional which is an Insolvency Professional Entity (IPE).
An IPE can be a company, limited liability partnership or a registered partnership firm.
IBBI said that since an IPE acting as an IP would have multiple individuals as its partners or directors, a need is felt to clarify on the initiation of disciplinary proceeding in case of contraventions.
In a circular issued on Thursday, the regulator said for contraventions, the show cause notice can be be issued to the IPE’s partner or director who is an IP and was authorised to act on behalf of it for the respective assignment.

Further, the circular said that if there are either repeated instances of contravention against one or more partners or directors, then the show cause notice can be served to the IPE.

According to IBBI, the norms that provide for restrictions on the number of assignments that can be undertaken by an IP will not be applicable for IPEs. Regarding the fee structure, the regulator said that with the introduction of provisions allowing IPE to act as IP, it is considered prudent that IPEs have an expanded role, and their fee should be market-determined at this juncture. “Also, given their institutional framework, IPEs are better placed to negotiate their fees commensurate with their pool of in-house resources and diverse range of services offered by them as compared to an individual IP,” it added.

In another circular on Thursday, IBBI provided clarifications in relation to rendering of professional service by an IP in implementation of the resolution plan approved by the Adjudicating Authority (AA) as well as on compliance regarding billing/ invoicing for services availed by IP from professionals.

“… in order to facilitate smooth implementation of the resolution plan, it is hereby clarified that an IP may render professional service in relation to implementation of resolution plan approved by the AA, provided details of such service are mentioned in the resolution plan approved by the AA,” it said.

Besides, the circular said the bill or invoice may be raised in the name of the IPE or the professional or the firm in which such professional is a partner.

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