INSOLVENCY PROFESSIONAL ENTITY

[Mr. M. GOVINDARAJAN]

Insolvency Professional Entity

Insolvency Professional Entity (‘IPE’ for short) is considered as one of the service providers to the Insolvency and Bankruptcy Board of India (‘IBBI’ for short).  The IBBI has institutionalized the concept of an IPE whereby several Insolvency Professionals  can come together and pool their resources and capabilities to form an IPE so as to handle insolvency proceedings involving very high stakes or where complex issues of law or practical difficulties are involved. In terms of applicable regulations, the sole objective of IPE would be to provide support services to Insolvency Professionals.

Recognition of IPE

A company, a registered partnership firm or a Limited Liability Partnership may be recognized as an IPE subject to the conditions stipulated in Regulation 12(1) of IBBI (Insolvency Professional) Regulations, 2016. 

Conditions

The following are the conditions prescribed for the recognition of an IPE-

• its objective is to provide support services to insolvency professionals or to carry on the activities of an insolvency professional or both;
• it has a net worth of not less than Rs.100 crore;
• majority of its equity shares and voting rights are held by insolvency professionals, who are its directors, in case it is a company;
• majority of capital contribution is made by insolvency professionals, who are its partners, in case it is a limited liability partnership firm or a registered partnership firm;
• majority of its partners or directors, as the case may be, are insolvency professionals;
• majority of its whole time directors are insolvency professionals, in case it is a company; and
• none of its partners or directors is a partner or a director of another insolvency professional entity.

Procedure for getting recognition

A person eligible may make an application for recognition as an insolvency professional entity to the Board in Form C online.  The fee payable along with the application is Rs.2 lakhs.  The Board shall acknowledge an application made under this regulation within 7 days of its receipt.

The Board may scrutinize the application and if necessary-

• require the applicant to submit, within reasonable time, additional documents, information or clarification;
• inspect or inquire the applicant;
•  require any of the directors or partners of the applicant to appear, within a reasonable time, before it in person for any clarifications,

as may be necessary for the purpose of considering the application.

On consideration of the application, if the IBBI is satisfied that the applicant is eligible, it may grant a certificate of recognition as an insolvency professional entity within 60 days of receipt of the application.  For this purpose the time taken by the applicant for submitting additional documents, information or clarification, or appearing in person shall be excluded.

Rejection of application

If the IBBI is of the prima facie opinion that the recognition ought not to be granted, it shall communicate such opinion along with reasons thereof and provide the applicant an opportunity to submit its explanation within 15 days of the receipt of the communication from the Board, to enable it to form a final opinion.  In response to the communication the applicant shall submit the explanation within 15 days from the date of receipt of the communication.  On considering the explanation the IBBI may grant the certificate of recognition or reject the application within 30 days of receipt of the explanation.

The Recognition certificate shall be in Form D.

Conditions for recognition

The grant of recognition to an IPE is subject to the following conditions-

• at all times continue to satisfy the requirements under Regulation 12 (Recognition of IPE);
• inform the Board, within  30 days, when an individual ceases to be its director or partner, as the case may be, in Form F of the Second Schedule along with a fee of Rs.2000/-. In case the insolvency professional entity is enrolled with an insolvency professional agency, the intimation under this clause shall also be made to such insolvency professional agency to update its register of professional members

• inform the Board, within  30 days, when an individual joins as its director or partner, as the case may be, in Form F of the Second Schedule along with a fee of Rs.2000/- In case the insolvency professional entity is enrolled with an insolvency professional agency, the intimation under this clause shall also be made to such insolvency professional agency to update its register of professional members.
• pay to the Board, a fee calculated at the rate of  1% of the turnover from the services rendered by it in the preceding financial year, on or before the 30th of April every year, along with a statement in Form G.  In case the insolvency professional entity is registered as an insolvency professional, the services for the purpose of this sub-regulation shall not include the services rendered as an insolvency professional provided under third proviso to clause (ca) of sub-regulation (2) of regulation 7 (a fee calculated at the rate of  1% of the professional fee earned for the services rendered by it as an insolvency professional in the preceding financial year, on or before the 30th of April every year, along with a statement in Form E).
• submit to the Board, by 15th day of October every year, a compliance certificate in Form H, for the preceding financial year
• abide by such other conditions as may be specified.

Liability

An insolvency professional entity shall be jointly and severally liable for all acts or omissions of its partners or directors as insolvency professionals committed during such partnership or directorship.

De-recognition

Where the IBBI is of the opinion that sufficient cause exists for de-recognition of an insolvency professional entity, it may do so by passing a reasoned order.

Interest

Any delay in payment of fee by insolvency professional or an insolvency professional entity, a simple interest at the rate of 12% per annum on the amount of fee unpaid shall be paid to the Board after the last date of payment of fee under these regulations.

IPE as Insolvency Professional

Insolvency and Bankruptcy Board of India (IBBI) had in June this year issued a discussion paper that sought 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 (IPs). As a first step in this process of allowing such entities to perform role of IPs, the regulator has allowed IPE to act as an IP.   For such registration, the IPE and its partners/directors will have to meet the ‘fit and proper person’ criteria which is determined by IBBI considering certain qualitative and financial aspects including integrity, reputation, character, absence of convictions and restraint orders, financial solvency and net worth.  Such IPE shall register itself with an IPA.

Statistics

Till date 151 IPEs were registered with IBBI.  Among them 46 IPEs were derecognized till date.  Balance 105 IPEs are in active status.