Home / Companies / News /  IBBI streamlines norms to aid insolvency professional entities

NEW DELHI: The Insolvency and Bankruptcy Board of India (IBBI) has amended its regulations governing insolvency professional entities to facilitate them to take on the task of administering companies that are going through the bankruptcy process.

The Model Bye-Laws and Governing Board of Insolvency Professional Agencies (Amendment) Regulations, 2022, brought out by the IBBI on 3 October streamlines the regulations regarding their enrolment for the task of administering sick companies. The regulations also make other consequential changes needed for facilitating this.

The move is significant as insolvency professional entities were, until last month, only allowed to assist the resolution professional hired by lenders to run companies in distress. That changed when IBBI brought out the Insolvency Professionals (Fourth Amendment) Regulations last month because entities can bring certain advantages over individual professionals.

These entities can bring multi-disciplinary expertise, which will be helpful in handling the bankruptcy resolution of large and complex companies. Mint was the first to report on 11 June that incorporated entities, such as firms, will be allowed to run bankrupt businesses in place of individual administrators hired by lenders.

The new regime allows entities to register themselves as insolvency professionals and perform associated duties. Earlier they were allowed only to provide support services to insolvency professionals.

In September, IBBI had allowed slicing up of businesses in distress so that individual units or assets can be sold separately which would attract more investor interest. The regulator considers that a mix of investors buying different parts of a bankrupt company is better than a single investor picking up the company as a whole as different investors may find individual units more strategically fitting.

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