Introduction
The Insolvency and Bankruptcy Board of India (‘IBBI’), deriving power from ss. 196, 208 read with s. 240 of the Insolvency and Bankruptcy Code, 2016 (‘IBC’), issued the IBBI (Insolvency Professionals) (Amendment) Regulations, 2024, (‘IP Regulations’)[i]. These amendments bring forth the regulatory landscape for insolvency professionals (‘IPs’) in India, highlighting significant adjustments in their roles and responsibilities.
Amendments Overview
Reg 22A: The IP Regulations added a new clause i.e., reg. 22A which provides for the resignation of IPs. The IP is permitted to step down or resign from their assignments. However, it mandates the need for approval from either the committee of creditors during a Corporate Insolvency Resolution Process (‘CIRP’), a consultation committee in the liquidation process, or relevant stakeholders in the insolvency resolution process for personal guarantors to the corporate debtor. Such resignations require the sanction of the Adjudicating Authority (‘AA’) to effectuate a proper exit.
Duty Continuation till Resignation Approval: The notification introduced an explanation under reg. 22A which provides that the IP is obliged to discharge duties, functions and responsibilities until their resignation receives approval from the AA.
Engagement of Partners or Directors: The IP Regulations further added an explanation in reg. 23B that IP entities can assign their partners or directors to manage tasks related to their assignments, barring the valuation and audit functions of the debtor. This demarcation aims to maintain the integrity and impartiality of financial assessments.
Scope of Services Extension: The IP Regulations added an explanation 2 under reg. 23C, which provides that the IP entity, acting as an IP, can offer a broader range of services through their partners or directors, again excluding valuation and audit. This expansion enables a more comprehensive approach to handling assignments.
Conclusion
The IP Regulations liberalize the operational scope of the IPs, allowing for a more flexible and efficient framework. By facilitating easier resignation processes and broadening the permissible range of activities for professional entities, these changes are poised to enhance the overall effectiveness of insolvency proceedings in India These modifications aim to enhance the efficiency and flexibility of the regulatory framework governing IPs in India, thus promoting a more adaptable and responsive insolvency regime.
End Note:
[i] Notification No. IBBI/2023-24/GN/REG 110 dated 31.01.2024.
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Authored by Purvi Garg, Advocate at Metalegal Advocates. The views expressed are personal and do not constitute legal opinion.
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