The insolvency regulator IBBI proposes to limit the maximum number of assignments handled by an insolvency professional (IP) under the corporate insolvency resolution process (CIRP) and liquidation process to five, at a given point of time.

This proposal, which is spelt out in a discussion paper brought out by IBBI, comes in the wake of current skewed work allocation amongst IPs and regulatory observation that a few IPs are handling too many assignments under the Insolvency and Bankruptcy Code ( IBC), which is detrimental to the institution of IP in the long run.

The Supreme Court had also in several orders urged IPs to refrain from accepting too many assignments in the best interest of the processes.

IBBI has now proposed a matrix where the maximum number of assignments that will be permitted for IPs in corporate debtors involved in manufacturing/trading/services/others having turnover less than ₹1,000 crore are proposed at five.

For those corporate debtors with turnover ranging from ₹1,000 crore to ₹5,000 crore, the cap has been pegged at four.

In the case of companies with turnover between ₹5,000 crore and ₹10,000 crore, the restriction is proposed at three assignments.

For companies with turnover exceeding ₹ 10,000 crore, the maximum number of assignments for an IP has been pegged at two. Where the company turnover exceeds ₹50,000 crore, the maximum number of assignments that can be handled by an IP is just one.

IBBI is of the view that the restriction on the maximum permissible assignments on an IP will put a check on undesirable instances of delay and disturbance to the processes led by IPs while simultaneously handling too many assignments under the IBC.

With limits in place, the quality of output is expected to improve; this, in turn, will facilitate realisation of the objective of value maximisation Asia enshrined in the code, according to IBBI. IBBI has given time till July 25 for public and stakeholders to electronically send in their comments on the discussion paper.

Harish Kumar, Partner, L&L Partners, said this IBBI proposal to cap the number of insolvency or liquidation assignments that can be handled by an IP has been long awaited to ensure smooth management of affairs of companies under insolvency/liquidation stage in view of necessary bandwidth of concerned IPs.

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