Govt strengthens role of resolution professionals
New Delhi, Nov 3, 2022
IBBI said it has subsumed three separate circulars issued in the past dealing with insolvency professionals into the regulations that govern self-regulatory bodies called insolvency professional agencies
The Insolvency and Bankruptcy Board of India (IBBI) has sought to strengthen the oversight of bankruptcy resolution professionals by codifying the norms applicable to them in the form of a regulation.
IBBI said it has subsumed three separate circulars issued in the past dealing with insolvency professionals into the regulations that govern self-regulatory bodies called insolvency professional agencies.
These self-regulators are set up by bodies like the Institute of Chartered Accountants of India (ICAI), the Institute of Cost Accountants of India and the Institute of Company Secretaries of India. They enrol, educate, monitor and regulate insolvency professionals. Chartered accountants, cost accountants, company secretaries and lawyers enrol as insolvency professionals.
These circulars deal with disclosure of relationships by insolvency professionals, annual compliance certificates issued to these professionals by their self-regulators and the penalties covering a list of contraventions by these professionals. Subsuming all these into regulations give the norms greater legal force, experts said.
By encapsulating earlier circulars on compliances, contraventions and monetary penalties on insolvency professionals, in the form of regulation, the Board has attempted to give greater strength to the contents of these circulars as circulars are treated to be guidelines, explained Yogendra Aldak, Partner, Lakshmikumaran & Sridharan Attroneys.
“Courts generally interpret circulars to be directory in nature unless it is specifically prescribed to be mandatory and binding. This step of the Board is likely to enable insolvency professionals to be more compliant with the contents of the circulars (now part of the regulation) which will result in effective insolvency resolution process," said Aldak.
IBBI gives special attention to the regulatory oversight of insolvency resolution professionals, hired by lenders to administer sick companies, as they are in charge of key tasks such as admission of claims made by various parties and in soliciting investors to stitch together corporate rescue plans.