Insolvency Professionals and Related Party


Insolvency Professionals and Related Party

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Insolvency Professional

The Insolvency and Bankruptcy Board of India (IBBI) has sought to streamline the process and criteria for registration of an insolvency professional (IP), seeking to institutionalise this important pillar of the Insolvency and Bankruptcy Code (IBC).

From April 1, to qualify as an IP, the National Insolvency Examination requirement has been done away with. However, an individual must clear the Limited Insolvency Examination in the 12 months prior to the date of his application for enrolment with an IP Agency.

Also, he must have cleared a pre-registration educational course from an IP Agency after his enrolment as a professional member.

An individual with the required experience of 10/15 years is eligible for registration as an insolvency professional. While the 10-year experience norm is for a chartered accountant, company secretary or a cost accountant, the 15- year experience rule is with regard to those with management qualifications.

In addition, an individual with little or no experience would be eligible for registration as an insolvency professional on successfully completing a Graduate Insolvency Programme, as may be approved by the IBBI.

Insolvency professional entity

The IBBI has also institutionalised the concept of an Insolvency Professional Entity (IPE), whose sole objective would be to provide support services to insolvency professionals who are its partners or directors, as the case may be. An IPE can take the form of a company, a limited liability partnership or a partnership, the IBBI has said. IBBI has also stipulated that the minimum net worth of an IPE should be Rs. 1 crore. Parties are likely to repose faith in IPEs where several IPs can come together and pool their resources and capabilities to handle insolvency proceedings involving very high stakes or where complex issues of law or practical difficulties are involved.

Related Party versus Corporate Debtor

Insolvency regulations just got tightened to ensure that only genuine claims of financial creditors’ and not sham transactions get compensated under the Insolvency and Bankruptcy Code (IBC).

From April 1, 2018 a financial creditor submitting a claim to an interim resolution professional (IRP) will have to declare if it is or not a ‘related party’ to the ‘corporate debtor’ facing an insolvency process.

The implication of being a ‘related party’ is that a financial creditor’s right to be part of the Committee of Creditors (CoC) under the insolvency process gets removed and, therefore, cannot vote in the decisions of the CoC. Until now, there was no requirement for any such declaration although the IBC explicitly disallows a related party — to whom a corporate debtor owes a financial debt — from participating or voting in the CoC, said legal experts.

Also Read Previous GK in Depth Blogs


Also Read: Insolvency and Bankruptcy Code

Read 360 times Last modified on Monday, 16 April 2018 14:24
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