Insolvency regulator IBBI proposes to revisit the policy of allowing only individuals to be registered as insolvency professionals. It now plans to widen the category of persons to also allow entities (company, limited liability partnerships, registered partnership firms) to get enrolled, registered and act as an insolvency professional.
Allowing entities to act as an IP will institutionalise the profession of IP and help establish better governance framework., IBBI has said. This would address the limitations posed by IP being an individual in dealing with large and complex processes requiring concurrent efforts and actions, it added.
As this is going to be a significant policy change in profession of IP, the IBBI wants to begin with considering allowing the existing Insolvency Professional Entity (IPE) to become IPs as they have the infrastructure and requisite exposure in providing support services to IPs. Also, existing IPEs, after seeking registration as IP, may also continue to provide support services to IPs.
To amend regulations
It is, therefore, proposed to amend Model Bye Law Regulations and IP Regulations to specify that the entities, which are presently recognised as IPE, should be eligible to get enrolment as professional member of IPA and registration as an IP with IBBI, respectively, the IBBI has said
The insolvency regulator has now issued a discussion paper for these proposed changes and invited public comments by July 5.
The IBBI wants to allow an entity to perform the functions of insolvency professional as a single insolvency professional may not have required skills, knowledge and experience as may be required.
Shailesh Poria, Partner, Economic Laws Practice, said IBBI proposes to permit juristic persons to be enrolled as insolvency professionals given that in several large corporate insolvencies, the individuals appointed as the IRP’s seek support services from Insolvency Professional Entities, Process Advisors etc.
In IBBI’s view these entities are not under a strong regulatory framework thereby impacting accountability, he said. “While proposing to permit IPEs to become IPs is a major step, an elegant solution in the interregnum would be to make IPEs to also abide by the Code of Conduct under Regulation 7 (h) of the Insolvency Professional Regulations 2016 which insolvency professionals are subjected to,” Poria added.