Insolvency regulator IBBI expands role of insolvency professional entities

In these trying times, insolvency regulator IBBI has given an opportunity for Insolvency Professional Entities (IPEs) to grow into the likes of the Big 4 in coming days. It has now broadbased the role of IPEs, which are usually created by 3-4 insolvency professionals — by allowing them to provide support services to any insolvency professional (IP) and not just the IPs who are its partners or directors of such entities.

Prior to the latest change, the Insolvency and Bankruptcy Board of India (IBBI) regulations stipulated that an IPE, which can take the form of an LLP, company or partnership, can provide support services only to the IPs who are its partners or directors. Its role earlier was to be a support organisation for its partners/directors. Now, this role has been expanded and the amended regulation reads that “the sole objective (of an IPE) is to provide support services to insolvency professionals”.

This latest IBBI move is also seen as one way of encouraging IPEs to operate as multi-disciplinary firms where chartered accountants, cost accountants, lawyers and company secretaries could be brought under one roof.

MS Sahoo, Chairman, IBBI, told BusinessLine this will further professionalise the field. “Insolvency Professionals will have access to regulated support services,” he said.

Earlier, those IPs who were not having their own IPEs had to go out to unregulated places to get support services. They were then required to pay huge fees. For instance, there was a recent IBBI Disciplinary Committee order that showed the IP fee in a case was ₹1.5 lakh, but the support services fee paid to a foreign service provider was ₹20 lakh per month.

Now, the IBBI wants IPs to go to a regulated place without wasting money unnecessarily. Insolvency Professional Entities can now provide support services not only to their own members, but to any other IPs as well. Those not having an IPE will have a better way of getting support services, an economy watcher said.

Harish Kumar, Partner, L&L Partners, a law firm, said this would facilitate functioning of IPs as the enhanced scope of services of such Insolvency Professional Entitites, as per the amended definition, would enable these entities to provide relevant support services to all IPs and not only those who are directors/ partners of such IPEs as per the erstwhile definition.

Abir Lal Dey, Partner, L&L Partners, said this would remove the difficulties faced by IPEs earlier. “This will make the IPE support services more competitive as the IPEs can serve insolvency professionals outside their organisations,” he said.

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