Centre issues three draft insolvency regulations

KR Srivats New Delhi | Updated on January 16, 2018 Published on October 09, 2016

Public comments sought by Oct 28

The Centre is moving ahead full throttle to implement an effective insolvency and bankruptcy regime, which is expected to help improve India’s ease of doing business ranking.

On the heels of setting up an Insolvency and Bankruptcy Board of India (IBBI), the Centre has framed three draft regulations around the Insolvency and Bankruptcy Code, which is being seen as an important area of economic reform.

The three draft regulations related to registration of insolvency professionals; registration of insolvency professional agencies (IPAs) and also the model bye-laws for IPAs.There is concerted effort on part of the Centre to quickly put in place the necessary framework, official sources said. The Corporate Affairs Ministry has invited public comments on these three draft regulations by October 28.

Over the next two days, there will be two more draft regulations — one on insolvency process for companies and the other on liquidation process for companies, official sources said. In all, there will be five regulations that would be set in motion initially to implement the Insolvency and Bankruptcy Code.

In due course, regulations will be introduced for the Insolvency process for individuals, it is learnt.

The feverish pace at which things are moving at the Government front can be gauged from the fact that the Insolvency and Bankruptcy Code was enacted into law only in May this year. Based on the public comments, the five regulations are now expected to be finalised by the IBBI in November this year.

Nitty gritty

In the case of IPAs, the draft regulations stipulate that a Section 8 company (non profit organisation) has to be set up for this purpose. An IPA is a body that will regulate the working of Insolvency professionals.

The draft regulations also stipulate that foreign residents cannot own more than 49 per cent of the IPA company. Also, the IPA cannot be a subsidiary of a body corporate through more than one layer.

For insolvency professionals, there will be oversight at two levels. An insolvency professional has to be member of the IPA and also be registered with IBBI. Even partnership firms are allowed to become an insolvency professional.

Only those residing in India can seek registration as an insolvency professional. Also, only those who have cleared the insolvency professionals written examination will be entitled to register. A framework for transitional registration is also proposed to be introduced for certain professionals (chartered accountants, lawyers, company secretaries, actuaries and cost accountants) with at least 15 years of experience.

Published on October 09, 2016
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