Insolvency regulator IBBI has directed Insolvency Professional Entities (IPEs) to refrain from joining any panel of any market participant.
The cautionary advice came in the form of a circular as it had come to the notice of the regulator that some market participants are seeking empanelment of IPEs and few IPEs are seeking empanelment with market participants. The Insolvency and Bankruptcy Board of India (IBBI) has reiterated the position of law that an IPE cannot provide any service to any person. An IPE can provide only support services to the insolvency professionals who are its partners or director, IBBI said.
An IPE — which can take the form of a company, LLP or partnership — is neither enrolled as a member of an Insolvency Professional Agency nor registered as an insolvency professional with the IBBI. “It cannot act as IP under the code,” the IBBI has said.
Punit Dutt Tyagi, Executive Partner, Lakshikumaran & Sridharan, a law firm, said the directive will ensure that independence of resolution professionals would be maintained and they remain neutral. “Suppose if you as an IPE are empanelled you may a vested interest. That is being avoided through this latest directive. Banks were looking to empanel IPEs and with the latest IBBI move that cannot be done,” Tyagi said. Pankaj Mahajan, Head-Restructuring & Insolvency, Mazars Advisory LLP, said the circular has just been issued to caution the creditors who were seeking to empanel the IP entities instead of individual resolution professionals.
“The law does not recognise IP entity as a resolution agency. It only recognises the individuals as resolution professionals. The role of IP entity is clearly defined as support organisation for its partners/ directors. It is just a clarification of law and issued a cautionary advice to market participants,” Mahajan told BusinessLine.