Insolvency and Bankruptcy Board of India
19th March, 2021
Release of publication “Handbook on Ethics for Insolvency Professionals: Ethical and Regulatory Framework”.
Dr. Navrang Saini, Whole Time Member, IBBI , in presence of Ms. Natalie Toms, Chief Economist and Counsellor, British High Commission, released a publication titled “Handbook on Ethics for Insolvency Professionals: Ethical and Regulatory Framework”, in a webinar organized today.
2. The Handbook prepared by the Insolvency and Bankruptcy Board of India in association with British High Commission is based on inputs on the best practices followed by the Insolvency Practitioners in the United Kingdom and aims to stimulate the highest standards of ethics and professionalism among the Insolvency Professionals. This Handbook serves as a ready reckoner and a tool to assist the insolvency professionals and other stakeholders in the insolvency ecosystem, for imbibing and practising an ethical code of conduct.
3. The Handbook details several aspects of professional ethics, including conflict of interest, independence, impartiality, objectivity and timelines, etc. in a comprehensive manner, and is expected to serve as an important knowledge product for development and percolation of standards of professional and ethical conduct for IPs enabling proactive compliances with utmost care and diligence.
4. The Handbook is in line with the ground realities of the Indian insolvency ecosystem and is expected to serve as a practical guide for IPs in discharging of their duties ethically and effectively.
5. In his address on the occasion, Dr. Saini, highlighted the importance of adherence to Code of Ethics for IPs taking into account the all-pervasive role of IPs in various processes under the Code. The launch was followed by the webinar on “Pre-Pack Insolvency Resolution Process: Report of the Sub-Committee of the ILC”.
6. The publication is available at www.ibbi.gov.in.
Handbook on Ethics for Insolvency Professional
Ethical and Regulatory Framework
The profession of Insolvency Professionals (IPs) has evolved considerably in the short span of 4 years since December, 2016 with almost 3,200 IPs as on 30th September 2020 registered with the Insolvency and Bankruptcy Board of India (“IBBI” / “Board”).
An IP is pivotal to the creditor-in-control process and acts as a bridge between the Adjudicating Authority, the CoC and other stakeholders. Being vested with the power of board of directors and responsible for the management of affairs of the corporate debtor, an IP plays a key role in the lifecycle of corporate insolvency resolution process (CIRP).
While the powers vested with the IP are necessary to conduct an effective creditor-in-control bankruptcy process to maximize the enterprise value, it is also essential to administer discretion in the use of such powers to ensure that the CIRP is run in a fair and unbiased manner to protect the commercial interests of all stakeholders. The strength and efficiency of a bankruptcy regime in India will remain undiluted only if the IPs observe high standards of professional ethics. A profession, eventually, is only as good as its members.
The Insolvency Professional Agencies (IPAs) under the Insolvency & Bankruptcy Code, 2016 (“Code”) are professional bodies mandated to promote the professional development and first-tier regulation of IPs. The IPAs develop professional standards and code of ethics under the Code, audit the functioning of their members, discipline them, and take actions against them, if necessary. IPAs are also entrusted with the responsibility to make bye-laws consistent with the model bye-laws as specified by the IBBI.
Currently, the IPs are governed by the Code of Conduct as defined under the IBBI (Insolvency Professionals) Regulations, 2016 (“IP Regulations”). All IPs are required to adhere to the Code and in particular to the spirit of the Code in all their professional activities.
The Code of Conduct is generally derived from the Codes of ethics. These ethical norms are benchmark of right actions at a given point of time which the society or the system expects from an individual and are responsible for strengthening the legal system.
As far as the IPs are concerned, the code of conduct has been codified in writing and enforced with penalties in various countries. The code of ethics aims to help IPs or practitioners meet their professional obligations.
In the United Kingdom (UK), the Code of Ethics for insolvency practitioners details how the code should be applied in specific circumstances. It lays down five fundamental principles which guide how IPs should act in the course of their work:
Therefore, the IPs are to work to the highest standards of professionalism, to attain the highest levels of performance, and at all times comply with the provisions of the Code and regulations made thereunder as also terms and conditions specified in the bye-laws of the IPAs of which they are professional members and take reasonable care and diligence while performing their duties.
In the past over four years, since the enactment of the Code, the success of the insolvency and bankruptcy regime hinges, to a large extent, on the quality, commitment, and conduct of the professionals associated with the insolvency ecosystem. Despite the fact that the IBC regime is comparatively new, yet there is a sense of accomplishment in terms of attaining systemic maturity and extraordinary outcomes.
As an important stakeholder of the ecosystem, the Insolvency professionals are required to maintain fine balance between high degree of proficiency and ethical standards. Ethical standards largely entail commitment to excellence, preservation of reputation, and requires stringent compliance to statute without any consideration of undue favours or moral turpitude. The IP is expected to act in good faith in discharge of his dues, with utmost integrity, objectivity, independence, impartiality and should make earnest efforts to maximize the value of assets of the debtor. An IP needs to ensure that the Corporate Insolvency Resolution Process is run in a fair and objective manner in the best interest of the stakeholders. Thus, it is of utmost importance that the IPs maintain high standards of professional ethics, so as to maximise value for all stakeholders. The professionals are also expected to maintain the highest standards of professional competence and professional ethics while discharging their duties.
It is against this background, that the Insolvency and Bankruptcy Board of India has brought out this ‘Handbook on Ethics’, to stimulate the highest standards of ethics and professionalism among the IPs, together with British High Commission, who facilitated in obtaining inputs on the best practices followed by Insolvency Practitioners in UK. The book details several aspects of professional ethics, including conflict of interest, independence, impartiality, objectivity and timelines in a comprehensive manner, for achieving the highest level of effectiveness, and compliance with the provisions of the Code in letter as well as spirit. Further, it also contains various conceptual and fundamental principles, in line with best practices, emulated by the IPs in the UK. This Handbook serves as a ready reckoner and a tool to assist the insolvency professionals and all other stakeholders in the insolvency ecosystem, for practising an ethical code of conduct.
I sincerely believe that this Handbook is in line with the ground realities of the Indian Insolvency Ecosystem and would serve as a practical guide for IPs in discharging of their duties ethically and effectively. It would also aid in development and percolation of standards of professional and ethical conduct for IPs and enable proactive compliance with the existing regulatory provisions, with utmost care and diligence, to improve and sustain highest levels of performance.
Dr. Navrang Saini
Whole Time Member
Insolvency and Bankruptcy Board of India