The Insolvency and Bankruptcy Board of India (IBBI) has sought to streamline the process and criteria for registration of an insolvency professional (IP), seeking to institutionalise this important pillar of the Insolvency and Bankruptcy Code (IBC).
Insolvency resolution professionals determine the life and death of a company in the insolvency process. The IBBI move to revamp the regulations governing insolvency professionals is seen by legal experts as a “positive step” at an “apt time”.
Come April 1, to qualify as an IP, the National Insolvency Examination requirement has been done away with. However, an individual must clear the Limited Insolvency Examination in the 12 months prior to the date of his application for enrolment with an IP Agency.
Also, he must have cleared a pre-registration educational course from an IP Agency after his enrolment as a professional member.
An individual with the required experience of 10/15 years is eligible for registration as an insolvency professional. While the 10-year experience norm is for a chartered accountant, company secretary or a cost accountant, the 15- year experience rule is with regard to those with management qualifications.
In addition, an individual with little or no experience would be eligible for registration as an insolvency professional on successfully completing a Graduate Insolvency Programme, as may be approved by the IBBI.
Insolvency professional entity
The IBBI has also institutionalised the concept of an Insolvency Professional Entity (IPE), whose sole objective would be to provide support services to insolvency professionals who are its partners or directors, as the case may be. An IPE can take the form of a company, a limited liability partnership or a partnership, the IBBI has said. IBBI has also stipulated that the minimum net worth of an IPE should be ₹1 crore.
Commenting on the move, Punit Dutt Tyagi, Executive Director, Lakshmikumaran & Sridharan, a law firm, said the fact that IPs are vested with extensive powers during the insolvency process makes it essential that all parties are able to rely on the IP and his capacity to carry out his functions. effectively
Parties are likely to repose faith in IPEs where several IPs can come together and pool their resources and capabilities to handle insolvency proceedings involving very high stakes or where complex issues of law or practical difficulties are involved, he said.
“In this context, the inclusion of a minimum net worth criteria of ₹1 crore appears to be an attempt by the legislature to ensure the credibility of companies or partnerships or LLPs seeking to be recognised as an IPE,” Tyagi said.
Sundaresh Bhat, Partner-Business Restructuring Services, BDO India, said the new amendments seek to eliminate loosely knit insolvency professional entities. However, it is to be noted that there is still no legislation in place that provides a legal status to IPEs, whereby an IPE can take on a Corporate Insolvency Resolution Process mandate in its name, he said.