Home / Economy / Entities can run sick cos as they bring expertise: IBBI

The Insolvency and Bankruptcy Board of India (IBBI) on Friday said institutions can function as individual insolvency professionals to administer sick companies, considering that a professional team is expected to bring in multiple skill sets needed for salvaging companies.

The Insolvency Professionals (Fourth Amendment) Regulations were made public on Wednesday.

“Considering the limitations of an insolvency professional, being an individual, in dealing with processes under the Bankruptcy Code, requiring concurrent efforts, and multi-disciplinary expertize, the board decided to institutionalize the profession of insolvency professionals. To begin with, the board has considered it appropriate to enable insolvency professional entities recognized by the board to carry on the activities of an insolvency professional," the board said.

Mint was the first to report on 11 June that incorporated entities, such as firms, will be allowed to run bankrupt businesses instead of individuals hired by lenders.

The regulations allow entities to register themselves as insolvency professionals and perform the associated duties. Earlier, they were allowed to provide only support services to insolvency professionals.

Since an individual, administering a sick company undergoing bankruptcy resolution, takes on the tasks of an entire board of directors, it is not possible for him to complete every task necessary to resuscitate a company optimally due to lack of time and expertize, it said.

Industry experts welcomed the move. “Individuals serving as an insolvency professional might have limitations while dealing with the multifarious issues of a company’s operations due to lack of time and, in certain cases, even expertize," said Pritika Kumar, founder of law firm Cornellia Chambers. “Insolvency professional entities have corporate governance as well as risk management structures in place, and may not face limitations due to their institutionalized nature," he added.

To rescue more firms and help lenders to cut losses while offering help to sick companies, IBBI is working on making sweeping changes to bankruptcy rules. Earlier, it allowed slicing up of businesses in distress to ensure individual units or assets can be sold separately to get more investor interest.

 

ABOUT THE AUTHOR

Gireesh Chandra Prasad

Gireesh has over 22 years of experience in business journalism covering diverse aspects of the economy, including finance, taxation, energy, aviation, corporate and bankruptcy laws, accounting and auditing.
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