Insolvency regulator Insolvency and Bankruptcy Board of India(IBBI) has proposed a slew of measures to enhance the effectiveness of Insolvency Professional Entities (IPEs) in the Insolvency Resolution Process.

The proposals outlined in a new discussion paper are aimed at rationalising the framework of IPEs commensurate to achieve the expected outcomes of their expanded role as Insolvency Professionals (IPs).

The discussion paper covers four main issues —monitoring of IPE acting as IP; related party definition for an IPE acting as IP; restriction on number of assignments by an IP and minimum fee structure of an IPE acting as IP. The public comments on the discussion paper have to be sent in by November 11, IBBI has said.

Procedural Clarity

The proposals in the discussion paper are expected to provide clarity and flexibility to the IPEs to perform their functions within the purview of regulatory framework.

As of September 30, there are 113 active recognised IPEs. Of these 64 entities have also been registered as IPs.

The discussion paper provides that for an IP who is an individual, overall limit of 10 assignments at any point of time would be applicable, out of which not more than three can have admitted claims exceeding ₹ 1,000 crore each. The overall limit includes all the assignments of an IP.

IPs, Entities

For an IP which is an entity, overall limit has been pegged at five assignments per partner or director who are IPs, at any point of time ( excluding the assignments taken by an IP in his individual capacity). However, number of assignments for an IPE acting as IP at any point of time should not be more than 15 assignments having admitted claims exceeding ₹ 1,000 crore each. The overall limit includes all the assignments of an IPE acting as IP, the discussion paper said.

IBBI had last year allowed IPE to be registered as an IP and carry on the activity of such professionals under the Insolvency and Bankruptcy Code (IBC). 

This was a big policy shift as earlier only individuals were permitted to register as function as an IP in India. 

Although the IBC  provides for a wider definition of person which includes both the natural as well as juristic persons who can act as IPs, the regulations had limited ambit of specifying only an individual i.e., a natural person to get enrolled, registered and act as an IP. 

This has been taken care of by allowing IPEs to act as IPs. This policy shift was also significant as only few countries (now India included) have allowed firms to undertake role of IPs.

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