Companies can now register themselves as insolvency professionals

Insolvency professional entities (IPEs) can now register themselves as insolvency professionals and perform all their functions, including managing operations of a company undergoing insolvency proceedings, according to the latest amendment by the Insolvency and Bankruptcy Board of India (IBBI). 

Earlier, the regulations only allowed the IPEs to provide support services to insolvency professionals.

“IPEs usually have corporate governance and risk-management structures in place and may not face such limitations due to their institutionalised nature,” said Pritika Kumar, founder, Cornellia Chambers. 

The move will revive a business, and individuals serving as insolvency professionals might be met with limitations while dealing with the multifarious issues that pop up in a company’s operations due to lack of time and, in certain cases, expertise, Kumar said. 

IBC experts said the amendment was long pending and will be especially useful for big companies, which land in insolvency. The IPEs would have a pool of professionals, including chartered accountants, MBAs, among others.

“IPEs would be better-equipped to market the companies for resolution, get a better price recovery. Simply making a public announcement for insolvency is not sufficient to gather investor interest. These things can happen only through an entity and not an individual,” said Manoj Kumar, partner, Corporate Professionals. 

Legal experts said many individual professionals were engaging the services of IPEs as proxy. With the new amendment, such malpractices would be eliminated. 

The amendment allows even a company, registered partnership firm, or a limited liability partnership to register itself with the IBBI as an insolvency professional.

“This move will strengthen the institution of insolvency professionals and address the problems faced by an individual acting as a resolution professional as entities are more adept to perform this role given their size and available manpower,” said Shivek Sharma, associate, Pioneer Legal.

The amendments also clarify that unlike insolvency professionals who need to undergo training, this requirement would not be applicable to the IPEs. 

IBBI has also introduced a form AA for registering an IPE as insolvency professional.   

“The regulation introduced a much-awaited mechanism for institutional engagement for the IBC corporate insolvency resolution processes. Institutional appointment as IPE is a robust and reliable structure and instils credibility and confidence amongst the stakeholders,” said Anoop Rawat, partner (insolvency & bankruptcy), Shardul Amarchand Mangaldas & Co.