Last updated: March 14th, 2020 4:23 PM

Insolvency and Bankruptcy Board of India

Since its constitution, the Insolvency and Bankruptcy Board has issued draft rules on the regulation of insolvency professionals (IPs) and insolvency professional agencies (IPAs) to handle bankruptcy issues in India. In this article, we look at the Insolvency and Bankruptcy Board of India and the Insolvency and Bankruptcy Code of India 2016 in detail.

Insolvency and Bankruptcy Rules & Regulations

The Insolvency and Bankruptcy Board of India (IBBI), in the exercise of its powers as ensured under section 240 of the Insolvency and Bankruptcy Code, 2016, has notified the subsequent two regulations:

• The Insolvency and Bankruptcy Board of India (Model Bye-Laws and Governing Board of Insolvency Professional Agencies) Regulations, 2016, and
• The Insolvency and Bankruptcy Board of India (Insolvency Professional Agencies) Regulations, 2016.

These two regulations inter alia enable for the eligibility norms to be a Professional Member of an Insolvency Professional Agency and also for eligibility norms to be subject to registration with the IBBI as an Insolvency Professional Agency.

Criteria for Becoming an Insolvency Professional Agency (IPA)

A company registered under Section 8 of the Companies Act, 2013 with a least amount net worth of Rs. 10 crores will be eligible to be an Insolvency Professional Agency. Greater than half of the Directors of its Board must be independent directors and not more than one-fourth of the Directors should be insolvency professionals. The Insolvency Professional Agency must have Membership Committee(s), Monitoring Committee, Grievance Redressal Committee(s), and Disciplinary Committee(s) for regulation and oversight of professional members.  Also, a Limited Liability Partnership (LLP), a registered partnership firm or a company can be recognized as a professional insolvency entity. For an LLP or Partnership Firm or Company under the professional insolvency entity, the partners of the LLP or registered partnership firm or a preponderance of the whole-time directors of the company will register as insolvency professionals under the Code. The IPA Regulations lay down the process and eligibility for registration as an IPA and grounds for rejection, suspension and cancellation of registration. The following is the stand of the IPA regulations on shareholding of an IPA. Only 49% of the share capital of an IPA can be in custody, either directly or indirectly, by a person inhabitant outside India. Additionally, previous approval of the Board requires when a person other than a constitutional body seeks to hold greater than 10% in the share capital of an IPA, either directly or indirectly. Every IPA applicant, together with its directors, promoters and all persons holding more than 10% of its share capital, is necessary to be a 'fit and proper' person as ensured by the Board based on the guidelines in the Code and the IPA Regulations. In-principle registrations (i.e., temporary registrations) are also accessible to IPs for a limited period of 1 year. The in-principle approval administration replaces the provisional and transitional registration regime anticipated in the draft IPA regulations.

Eligibility for Becoming an Insolvency Professionals

The following categories of individuals can be qualified for registration as an insolvency professional:

• Advocates, Chartered Accountants, Company Secretaries and Cost Accountants are having ten years of post-membership experience (practice or employment) or a Graduate with fifteen years' of post-qualification managerial experience, on the passing of the Limited Insolvency Examination.
• Any other individual on the passing the National Insolvency Examination.                     

Advocates, Chartered Accountants, Company Secretaries and Cost Accountants with greater than 15 years of practice experience may apply for registration, without any examination. However, applications for such registration is before 31st December 2016, and such registration will be applicable for a limited period of six months.

National Insolvency Examination

There will be a 'National Insolvency Examination' for qualifying Insolvency Professionals. The particulars of National Insolvency Examination, course outline, format and frequency of the examination will be published on the website of the Board at least 1 month before the examination.