The IBBI issued five regulations to provide for regulation of service providers and enable implementation of provisions relating to corporate insolvency resolution and liquidation. The details are as under:
I. The IBBI (Model Bye-Laws and Governing Board of Insolvency Professional Agencies) Regulations, 2016: These regulations make it mandatory for an Insolvency Professional Agency (IPA) to adopt bye-laws that are consistent with the Model Bye Laws issued by the IBBI. More than half of the directors of its Board of the IPA shall be independent directors and not more than one-fourth of the directors shall be IPs. The IPA shall have Membership Committee(s), Monitoring Committee, Grievance Redressal Committee(s), and Disciplinary Committee(s) for
regulation and oversight of professional members.
II. The IBBI (Insolvency Professional Agencies) Regulations, 2016: These regulations inter alia provide for the eligibility norms to be a Professional Member of an IPA and also for eligibility norms to be registered with the IBBI as an IPA. A company registered under section 8 of the Companies Act, 2013 with a minimum net worth of Rs.10 crore and a paid up capital of Rs.5 crore is eligible to be an Insolvency Professional Agency. At least 51% of the share capital of the IPA must be held, directly or indirectly, by persons resident in India. The IPA, its promoters, its directors and persons holding more than 10% of its share capital must be fit and proper persons.
III. The IBBI (Insolvency Professionals) Regulations, 2016: These regulations, inter alia provide for registration,
regulation and oversight of insolvency professionals (IPs). These provide for three modes of registration: (a) chartered accountants, company secretaries, cost accountants, and advocates who have been in practice for 15 years are eligible to seek for registration (with validity of six months) as IPs till 31st December, 2016; (b) chartered accountants, company secretaries, cost accountants and advocates with 10 years’ of post-membership experience (practice or employment) and graduates with 15 years’of post-qualification managerial experience are eligible for registration as IPs on passing the Limited Insolvency Examination; and (c) any other person is eligible for registration as IP on passing the National Insolvency Examination. These allow an IP to use organisational resources
of a recognised insolvency professional entity. A limited liability partnership, a registered partnership firm and a company can be recognised as an insolvency professional entity if a majority of the partners of partnership firm or a majority of the wholetime directors of the company are registered as insolvency professionals with the IBBI. The regulations provide for the code of conduct for IPs whereby IPs are required to inter alia adhere to timelines, maintain confidentiality, comply with the restrictions on employment and occupation and avoid conflict of interests.
IV. The IBBI (Insolvency Resolution Process for Corporate Persons) Regulations, 2016: The regulations delineate the processes and activities from initiation of Corporate Insolvency Resolution Process (CIRP) till its conclusion with approval of the resolution plan. These regulations prohibit an insolvency professional from acting as a resolution professional for CIRP of a corporate debtor if he is not independent of the corporate debtor. These prohibit partners or directors of an insolvency professional entity of which the insolvency professional is a partner or director from representing other stakeholders in the same CIRP. These oblige the insolvency professional to make disclosures – initial and continuing – if he has any pecuniary or personal relationship with any of the stakeholders entitled to distribution of assets. These regulations specify the manner and contents of public announcement, receipt and verification of claims of creditors, formation of committee of creditors, and manner of holding meetings of committee of creditors and voting in such meetings. These also specify the contents of information memorandum and of resolution plan, including its implementation schedule, and the manner of determination of liquidation values. These further specify the components of resolution process costs and scope of essential supplies.
V. The IBBI (Liquidation Process) Regulations, 2016: These regulations inter alia provide for the details of activities from issue of liquidation order under section 33 of the Code to dissolution order under section 54. These regulations prohibit an insolvency professional from acting as a liquidator for a corporate debtor if he is not independent of the corporate debtor. These prohibit partners or directors of an insolvency professional entity of which the insolvency professional is a partner or director from representing other stakeholders in the same liquidation process. These oblige the liquidator, and also registered valuer(s) and professional(s) assisting him in liquidation to make disclosures – initial and continuing – about pecuniary or personal relationship with any of the stakeholders entitled to distribution of assets. These regulations specify the manner and contents of public announcement, receipt and verification of claims of stakeholders, reports and registers to be maintained, preserved and submitted by the liquidator, the manner of realisation of assets and security interest, and distribution of proceeds to stakeholders. These regulations provide that a liquidator should ordinarily sell the assets through auctions. He may sell the assets through private sale only when the asset is perishable; the asset is likely to deteriorate in value significantly if not sold immediately or the asset is sold at a price higher than the reserve price of a failed auction. He may sell an asset on standalone basis, or assets in a slump sale, assets in parcels or a set of assets collectively. These regulations provide that the fee payable to a liquidator shall form a part of liquidation cost. These further provide that a liquidator shall be paid such fees and in such manner as has been decided by the committee of creditors during the resolution process. In all other cases, the liquidator shall be entitled to a fee as a percentage of the amount realised net of other liquidation costs and of the amount distributed.