With these measures, the IBBI seeks to pave the way for the efficient conduct of processes by IPs and facilitate IPEs to undertake activities of an IP.
The clarifications provided by the IBBI, vide circulars dated February 1, 2024, are as follows: –
Providing professional services in implementation of resolution plan
The IP can provide professional services in the implementation of the resolution plan approved by the Adjudicating Authority (AA). However, the resolution plan must contain details of such services, in view of Regulation 38 of the IBBI (Insolvency Resolution Process for Corporate Persons) Regulations, 2016 (CIRP Regulations), which lists the details to be incorporated in the resolution plan.
Billing or invoicing for professional services
When an IP engages an IPE or a professional, it will suffice if the bills or invoices are raised by such a professional in the name of the firm in which he or she is a partner, for compliance with Clause 25C of the Code of Conduct under the First Schedule to the IBBI (Insolvency Professionals) Regulations, 2016 (IP Regulations). The said Clause requires the IP to ensure that the IPE or professional raises the bills or invoices in their own name towards their fees. IBBI’s clarification provides an additional option, enabling billing or invoicing for professional services in the name of the firm in which the IPE or professional is a partner.
Initiation of disciplinary proceedings against an IP which is an IPE
When an IPE acts as an IP and such an IP undertakes the assignment, the show-cause notice under Regulation 11 of the IBBI (Inspection and Investigation) Regulations, 2017, has to be issued to its partner or director authorised to sign and act for the respective assignment. In case of systemic failure or repeated instances of contravention, the notice will have to be issued to the IPE as well.
No limit on number of assignments for IPs which are IPEs
The restriction on the number of assignments that can be undertaken would not apply to an IP which is an IPE. Considering that it has been less than two years since IPEs were allowed to carry on activities of an IP, it was adjudged necessary to do away with the limit prescribed under Clause 22 of the Code of Conduct specified in the First Schedule to IP Regulations, for such IPs.
Fee structure under CIRP Regulations does not apply to IPs which are IPEs
The fee structure provided under Regulation 34B of the CIRP Regulations would not apply to IPs which are IPEs as their fees have to be proportionate to the extensive range of services offered by them in comparison to individual IPs. It was noted by the Board that, at this point in time, the fees of the IPEs should be “market-determined”.
Since 2022, IPEs providing services as IPs have been an essential and inseparable part of insolvency matters involving large corporate debtors undergoing CIRP or liquidation. The requirement of having IPEs in the insolvency environment was for the purpose of improving efficiency and quality of services. The circulars dated February 1, 2024, provide much-needed clarity on the fees chargeable, the limit on the number of assignments and the liability of IPEs and their partners. The clarifications would generically contribute to more enhanced, effective, and responsible contributions from IPEs. The clarity provided for initiating disciplinary proceedings would enhance the understanding of roles, responsibilities, and accountability of partners within an IPE. The removal of the cap on fees would facilitate the participation of reputed, competent, and efficient IPEs with superior resources in diverse areas related to insolvency matters thereby bolstering the insolvency landscape under the IBC regime. Further, the clarification that IPEs would not be subject to any limits on the number of assignments would facilitate IPEs in engaging and providing broad base resources and capabilities thereby catalysing a greater volume of quality and flexibility in services. Interested parties should definitely welcome these clarifications by aligning themselves to having a more streamlined engagement of IPEs at a competitive cost.
The restriction on the number of assignments that can be undertaken would not apply to an IP which is an IPE. Considering that it has been less than two years since IPEs were allowed to carry on activities of an IP, it was adjudged necessary to do away with the limit prescribed under Clause 22 of the Code of Conduct specified in the First Schedule to IP Regulations, for such IPs. This measure would facilitate IPEs in engaging and providing broad base resources and capabilities thereby catalysing a greater volume of quality and flexibility in services.