Introduction
In a proactive move to enhance the efficiency of insolvency resolution and liquidation proceedings, the Insolvency and Bankruptcy Board of India (‘IBBI’) has recently issued the Insolvency Professionals (‘IPs’) to act as Interim Resolution Professionals (‘IRPs’), Liquidators, Resolution Professionals (‘RPs’) and Bankruptcy Trustees (‘BTs’) (Recommendation) (Second) Guidelines, 2023. This update delves into the pivotal aspects of the revised guidelines that have repealed the Guidelines dated 12.06.2023.
Evolution of Regulatory Framework
The revised guidelines mark a significant departure from the previous guidelines, emphasizing the IBBI’s commitment to continuous improvement. By repealing the guidelines of 12.06.2023, the IBBI aims to streamline the appointment process and avoid administrative delays under the Insolvency and Bankruptcy Code, 2016 (‘IBC’).
Recognizing the critical role of IPs in the insolvency process, the IBBI has deemed it necessary to create a panel of IPs in advance. The panel of IPs, prepared in accordance with these guidelines will be effective from 01.01.2024 to 30.06.2024.
Eligibility
The eligibility criteria laid out in the revised guidelines underscore the IBBI’s commitment to ensuring that only competent professionals are entrusted with insolvency-related responsibilities. A clean disciplinary record, the absence of convictions in 3 preceding years, submission of expression of interest (‘EOI’) consent to act in various capacities, and possession of a valid authorization for assignment are prerequisites for inclusion in the panel.
Expression of Interest
The IBBI introduces a systematic process for IPs to express their interest and consent through submission of Form A annexed to the said guidelines. The submission of an EOI in the prescribed manner, shall serve as unconditional consent to act as an IRP, liquidator, RP, or BT. The IPs were also required to specify the sectors they have handled under the IBC vide this form. The deadline of 25.12.2023 to submit EOIs, and subsequently by 29.12.2023, reflects the IBBI’s commitment to efficiency and transparency in the selection process.
Strategic Panel Formation
The creation of a comprehensive panel of IPs categorized by zones ensures a geographically balanced and diverse pool of professionals. The adjudicating authority’s discretion in choosing from this panel or outside reflects a nuanced approach to appointing able IPs with expertise in specific insolvency scenarios. The validity of this common panel is stated to be 6 months.
Recognizing Expertise and Seniority
To align with the objectives of the IBC, the guidelines incorporate a scoring system based on the volume of completed assignments and the chronological order of IP registrations. This dual criteria approach ensures a balance between experience and seniority, which are key factors in handling complex insolvency matters.
Ensuring Commitment and Integrity
Inclusion in the panel implies a commitment by IPs to act upon appointment. The guidelines establish stringent conditions to prevent unwarranted withdrawal of consent and stress the importance of maintaining registration and authorization throughout the panel’s validity period. Accordingly, refusal to carry out their duty on an appointment without any justification would result in the removal of the IP from the panel for 6 months.
Conclusion
The revised guidelines signify a commendable step forward in fortifying the insolvency framework in India. By instituting a systematic selection process, clarifying eligibility criteria, and prioritizing experience and seniority, the IBBI aims to bolster the efficiency and credibility of insolvency proceedings. This forward-thinking approach is poised to contribute substantially to the evolution and success of insolvency practices in the country.
Authored by Nitish Solanki, Advocate at Metalegal Advocates. The views expressed are personal and do not constitute legal opinion.