Resolution professionals cannot take up insolvency assignments once they have attained the age of 70, insolvency regulator IBBI has said.
They will not be eligible to obtain the ‘Authorisation for Assignment’ from the Insolvency Professional Agency (IPA) once the 70 years age is attained, according to IBBI.
From January 1 next year, insolvency professionals can take up assignments only if they have obtained an ‘Authorisation for Assignment’ from an IPA.
Given the work pressures of resolution professionals, an age limit is seen as necessary for taking up insolvency assignments. However, there is no age bar in being employed as a professional with an insolvency professional entity (IPE), sources in IBBI said.
An individual can now seek registration as an insolvency professional even when he/she is in employment. He/she must however discontinue employment when he/she wishes to have an ‘Authorisation for Assignment’, which has to be surrendered once he/she takes up employment again.
Simply put, an insolvency professional cannot engage in any employment when he/she holds an ‘Authorisation for Assignment’ or when he/she is undertaking an assignment.
Conflict of interest
Also, insolvency professionals are now barred from engaging or appointing any of their relatives or related parties for or in connection with any work relating to any of their assignments.
An insolvency professional or his relative cannot take up employment with the same corporate for which it had conducted the corporate insolvency resolution process (CIRP). This restriction will hold good for a period of 12 months from the date of his cessation from such process. They can’t get employed even with the creditors (with voting power in excess of 10 per cent) who have supported the corporate debtor.
Raj Rani Bhalla, Partner, MV Kini & Co, a law firm, said that the amendments (conflict of interest, cooling off period) will restrain an insolvency professional appointed as per the IBC from taking undue advantage of his/her position or to exert an implicit coercion on the corporate debtor. “A welcome step to bring more transparency,” she said.
Aseem Chawla, Managing Partner, ASC Legal, said that the latest prescriptions by IBBI would avoid not only situations of conflict of interest but also mitigate situations of abuse of “authorisation of assignment” issued by the insolvency professional agency for the purposes of undertaking the assignment of interim resolution professional, liquidator etc.
“Such restrictions are prima facie reasonable in nature,” he said.