Insolvency regulator IBBI has tightened the governance norms of Insolvency Professional Agency (IPA), stipulating self-evaluation of the Governing Board every year besides mandating appointment of a compliance officer.
Also, only those individuals who satisfy the eligibility norms decided by the Governing Board can be appointed as shareholder directors, IBBI has now said.
IPAs are considered to be the frontline regulators under the insolvency regime in India. They are not for profit companies and basically enrol, educate, monitor, regulate and guide the insolvency professionals.
Besides mandating the appointment of a compliance officer, the IBBI has now amended the regulation around the IPAs to broad-base the composition of the Governing Board and also stipulated that Governing Board would have to “self evaluate” itself in a financial year within three months of the closure of the year. The self-evaluation report will have to be published on the website of the IPA, the IBBI has said.
IBBI has now allowed even individuals with expertise in “economics, accountancy and valuation” to be considered for being appointed as an independent director. Hitherto, only individuals with expertise in finance, law, management or insolvency were considered for being appointed as an independent director.
Also shareholder directors in the Governing Board will now have to satisfy the eligibility norms, including experience and qualifications, as decided by the Governing Board. Under the current regulations, a Governing Board of IPA should have at least seven directors including shareholder and independent directors.
Till date, there are three IPAs registered with the Insolvency & Bankruptcy Board of India. These are ICSI Institute of Insolvency Professionals, Indian Institute of Insolvency Professionals of ICAI and Insolvency Professional Agency of Institute of Cost Accountants of India.
Commenting on the latest IBBI move, Ashok Haldia, Chairman, Indian Institute of Insolvency Professionals of ICAI (IIIPI) told BusinessLine that IPAs are section 25 companies carrying exemptions from requirements related to corporate governance including related to board room governance, as applicable for other categories of companies.
“The IBBI through new regulation seeks to apply some of the best practices not otherwise required for companies under section 25 of the Companies Act 2013 being not for profit making.
The step is in the right direction as it would strengthen the board composition by inclusion of experts in important areas like economics, accountancy and valuation. Provisions in regard to self evaluation, appointment of compliance officer and others would enhance accountability of the governing board and the Board room governance”, Haldia said.
Good corporate governance is prerequisite for any company irrespective of its nature and size, he added. “Well governed IPAs should look beyond regulatory requirements to embrace in form and substance the best practices voluntarily”, Haldia said.