Under the Insolvency and Bankruptcy Code (IBC), so far only insolvency professionals (IPs) were permitted to perform all duties associated with the designation of IPs; insolvency professional entities (IPEs) were stipulated only to provide support services to IPs in resolution of bad assets.
To change this equation and to amplify efficiency and bring more transparency in insolvency proceedings, the Insolvency and Bankruptcy Board of India (IBBI) has issued a new directive to permit IPEs to register as IPs and perform duties of IPs.
This move will encourage more firms to register as IPEs as there would be more leverage for IPEs to perform all activities permitted to be performed by IPs – this would be a lucrative opportunity from business and finance perspective. Further, full scale involvement of IPEs in resolution of bad assets will result in better management of proceedings on expedite basis as IPEs will be equipped with better sources and infrastructure to push proceedings on a swift scale.
It is interesting to note that IPEs are entities established by a group of IPs to render multiple support services involved at different stages of insolvency proceedings to IPs – As per available statistics, as of now 142 IPEs and thousands of IPs registered with IBBI.
One of major reasons for delay in insolvency proceedings and resolution is due to handling of entire process by an individual resulting in unintended delays and also lack of appropriate infrastructure with IPs is another reason for current state of delay in the insolvency affairs
On other hand, IPEs will have more organized infrastructure with enhanced experience and expertise in handling different matters of legal, compliance and regulatory importance. This should enable IPEs to go through the insolvency proceedings and resolution process in a time bound manner without any delays.
We could also expect a sea change in the way an entity’s approach to a process from that of individual person’s approach. For entities, there is bigger scope for flexibility and luxury to perform multiple aspects simultaneously, which at times is not the case with the individual as individual can process one thing at a time, which is time consuming process – which is one of prime reasons for significant delays in insolvency proceedings.
Thus, the likely gains of IPEs registration as IPs can be summarized as under:
a) enhance the credibility, transparency and functionality of insolvency regulatory framework;
b) boost investors’ confidence in the process;
c) ease out complicate procedures and steps involved in different aspects of insolvency proceedings; and
d) Bring more value, expertise and experience to insolvency framework to speed up insolvency proceedings by many folds.
