Insolvency regulator, Insolvency and Bankruptcy Board of India (IBBI) has now brought in several changes to its Corporate Insolvency Resolution Process (CIRP) regulations as part of its overall effort to ensure arms-length dealings and transparency in the appointment and functioning of Resolution Professionals (RP).
Amendments have been introduced to ensure elimination of any potential conflict of interest in the functioning of RPs.
With the latest changes, an insolvency professional would not be eligible to be appointed as an interim resolution professional for a CIRP of a corporate debtor if he or any other partners or directors of such insolvency professional entity represent any other stakeholder in the CIRP process.
This is obviously designed at ensuring arms-length dealings and to preclude allegations of lack of fairness, collusion and to introduce a spirit of transparency, Faisal Sherwani, Partner, L&L Partners, a law firm told BusinessLine.
Stricter eligibility criteria
IBBI has introduced stricter eligibility criteria for the appointment of insolvency professionals, interim resolution professional and resolution professional. “Any linkage of the insolvency professionals with the corporate debtor or any of the stakeholders is now not permitted,” said Nishant Singh, Partner, IndusLaw.
IBBI has also now authorised interim resolution professionals and the resolution professionals to appoint, in addition to two registered valuers, any other professional that may be necessary to assist in discharge of such RP’s duties if an opinion is formed that such services are necessary and not available with the corporate debtor.
This will be allowed only when certain conditions are met such as explicit prohibition on appointment of (a) relative of resolution professional; (b) related party of corporate debtor; (c) auditor of corporate debtor at any time during the period of five years preceding the insolvency commencement date and a partner or director of the insolvency professional entity of which the resolution professional is a partner or a director.
Aseem Chawla, Managing Partner, ASC Legal, said, “The prescription is to ensure that the professionals appointed for other services are not affiliated with the Resolution Professionals both in personal and professional capacity. Also payments for such other engagements directly to bank account of the other professionals would mitigate and curb any malpractice. Such measures are a step in the right direction in improving the ethical conduct of Resolution Professional practice”.
Meanwhile, IBBI has also stipulated that an interim resolution professional would have to disclose any change in name and address of corporate debtor during 2 years preceding insolvency commencement date.