How IBBI's tighter compliance rules for resolution professionals will help
Panaji, November 4, 2022
Insolvency professional agencies will have to designate/appoint a compliance officer
The Insolvency and Bankruptcy Board of India’s (IBBI’s) latest circular to codify the norms for insolvency professionals would ensure stricter governance and transparency, industry experts said.
IBBI has consolidated changes to the principal regulations – which mandated insolvency professional agencies (IPAs) to submit annual compliance certificates, specify the list of contraventions by insolvency professionals and the amount of penalty to be imposed by IPAs -- in one circular.
“Model Bye-Laws and Governing Board of Insolvency Professional Agencies Regulations, 2016 and its recent amendments are a great step towards a more regulated IBC process,” Nishant Singh, partner, Luthra & Luthra Law Offices India, said. “This will ensure transparency and efficiency in the process as it will instill faith in all stakeholders, knowing that the process is being followed with clean hands.”
IBBI has also specified a detailed format that IPAs that regulate insolvency professionals have to submit annually to the regulator. The information sought includes details of the number of members, action taken against those members whose performance was found unsatisfactory, members suspended during the year, among others.
Experts said that IBBI has tightened the regulatory compliances for resolution professionals.
“The regulations have consolidated the individual circulars on compliances by resolution professionals covering declaration of relationship and penalties, amongst others. This is aimed to improve the quality of governance of IPs,” said Anoop Rawat, partner, Insolvency & Bankruptcy, Shardul Amarchand Mangaldas & Co.
IBBI will now have greater powers to regulate insolvency professions and insolvency professional agencies, insolvency experts pointed out. “The amended regulations are more stringent than the prevailing ones,” Jyoti Prakash Gadia, managing director at financial advisory firm Resurgent India, said.
One of the changes includes the penalties applicable to insolvency professionals for contraventions while handling an assignment, which have gone up.
Insolvency professional agencies will now have to designate or appoint a compliance officer who will be responsible for ensuring compliance with the provisions of the code, pertinent regulations, among others. The officer will also have to submit a compliance certificate to the IBBI in the revised format.
Some experts, however, feel that these regulations do not introduce any substantive changes as these amendments were already introduced by IBBI through its previous circulars. “It would not have an incremental impact on the resolution professionals or the IBC process,” Ketan Mukhija, partner, Link Legal, said.
Three major changes to model by-law
* IBBI has issued the format in which a compliance officer will certify insolvency professional agencies (IPA)
* IPA will also facilitate disclosure from its members of their relationship with other stakeholders like corporate debtor and financial creditor
* Authorisation for assignment will be suspended if disciplinary proceedings are initiated against the IP
[The Business Standard]