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Restrict the assignments to be handled by Insolvency Professionals

Restrict the assignments to be handled by Insolvency Professionals

As per our reports, the Insolvency & Bankruptcy Board of India (IBBI) recently in a discussion paper, restricted the number of assignments to be handled by Insolvency Professional (IPs) under the Corporate Insolvency Resolution    Process & Liquidation (including Voluntary Liquidation Process under Section 59 of the Insolvency & Bankruptcy Code, 2016. Restriction has not been imposed under the Code or by IBBI regarding the number of assignments to be handled by an IP at given point of time.

However, the Code of Conduct for IPs provides that they must not accept too many assignments, if they are unable to devote adequate time to every assignment. Proposed Restriction   According to the IBBI, few IPs are handling a lot of assignments under the Code, which could be detrimental in the long run. On comparing the role of an Insolvency Professional with a Managing Director of a company, & considering the extensive & intense responsibilities of IP in corporate processes, the Board has proposed the maximum number of assignments that can be handled by IPs:

  • 5 assignments (if the turnover of the Corporate Debtor is less than Rs. 1000 crore);
  • 4 assignments (if the turnover is between Rs. 1,000 crore- Rs. 5,000 crore);
  • 3 assignments (for turnover between Rs. 5,000 crore- 10,000 crore);
  • 2 assignments (in case the turnover is above Rs. 10,000 crore but below Rs. 50,000 crore);
  • 1 assignment in case the turnover of Corporate Debtor is Rs. 50,000 crore.

It can be concluded that the proposed restriction on IPs will put a check on undesirable instances of delays & hindrance to the processes under the Code. IBBI expects the quality of output to improve, with limits in place; which will facilitate inter alia realization of the objective of value maximization as provided under the Code. Further, this will be beneficial for development of market for professionals as more talent will be drawn towards IP profession.

 

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