New Delhi: In a step towards enabling the bankruptcy infrastructure, the government on Wednesday notified final regulations for insolvency professionals (IPs) who will be critical in the implementation of the insolvency and bankruptcy code (IBC) 2016.
The final regulations have three major changes from the draft ones—qualifications of IPs have been reduced to 10 years for practitioners (company secretaries, cost accountants, chartered accountants and lawyers) on passing a limited insolvency examination, companies and limited liability partnerships have been allowed to get registered as IPs and a national insolvency examination allows people with less than 10 years experience to become IPs.
However, a temporary six-month membership has been provided for practitioners who have more than 15 years experience, so long as they register before 31 December.
The regulations on liquidation are yet to be finalized.
The government has made the implementation of the IBC one of its bigger priorities to improve the ease of doing business in the country. This year’s World Bank doing business rankings put India at 136 out of 190 countries in the ‘resolving insolvency’ category.
The IBC, passed by Parliament in May, aims to improve the ease of doing business in India by facilitating smoother and time-bound settlement of insolvency and faster turnaround of businesses, apart from creating a database of serial defaulters.
Last month, the Centre had released draft regulations for the registration of insolvency professionals and agencies and model by-laws under the code. It also notified draft regulations on the insolvency resolution process for firms, the liquidation of insolvent firms and applications to judicial authority. The rules were put out for public comments till 31 October.
The Centre notified regulations for registration and model bye-laws for insolvency professional agencies (IPAs) on Monday.
With the regulations for the insolvency professionals and IPAs in place, the insolvency board should be operational soon. Earlier this month, the board, chaired by M.S. Sahoo held meetings to discuss the public comments and finalize draft rules to be notified under the code, taking stakeholders’ views into consideration.
The rules provide for registration and regulation of insolvency professionals under the code and will come into effect from 29 November.
“The regulations are very progressive in terms of the changes seen from the draft rules,” said Alok Dhir, managing partner at Dhir & Dhir Associates. He added that contrary to the draft rules which had more focus on individuals, the final regulations have brought in the concept of insolvency professional entities (registered partnerships, limited liability partnerships and corporate entities) saying that it is a very pragmatic approach taken by the board.
“The responsibilities of an IP are very onerous and it is difficult for an individual to possess multiple skills required to fulfil the obligations. An entity will have the capacity to bring diverse skill sets to a single platform,” Dhir added.