Insolvency and Bankruptcy Board of India vide notification dated 20th October, 2023 has issued a Discussion Paper on “Rationalization of the Regulatory Framework for Enhancing the Effectiveness of Insolvency Professional Entities in Insolvency Resolution Process”. The following proposals are provided:
- In case of contravention by the Insolvency Professional Entity(IPE) acting as Insolvency Professional(IP), the disciplinary proceeding shall be initiated against the IP who is/has been its authorized signatory for respective assignment(s). Upon initiation of disciplinary proceeding against such IP, the IPE shall not allow him/her to act as authorized signatory in any new assignment. Such action would not impact the ongoing assignment or status of AFA of the IPE acting as IP or its other partners or directors, as they are separate legal entity from the authorized signatory.
- If there are repeated instances of contravention or disciplinary proceeding against one or more partners or directors of the IPE acting as IP, the disciplinary proceeding may also be initiated against the IPE acting as IP on a case-to-case basis. However, such action would not impact the status of AFA of other partners or directors of the IPE.
- The partner or director of the IPE acting as IP may be excluded from the definition of related party for the purposes of clauses 23B and 23C of Code of Conduct specified in IP Regulations, except for the services related to valuation and auditing.
- Following limits are prescribed for IPs and IPEs in terms of assignments taken up: For IP who is an individual – Overall limit of 10 assignments at any point of time, out of which not more than three shall have admitted claims exceeding one thousand crore rupees each. The overall limit includes all the assignments of an IP. For IP which is an entity – Overall limit of 5 assignments per partner or director who are IPs holding AFA, 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 shall not be more than 15 assignments having admitted claims exceeding one thousand crore rupees each. The overall limit includes all the assignments of an IPE acting as IP.
- Existing fee structure is applicable for individual IP only and shall not be applicable in case of IPE acting as IP.