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Administrators of bankrupt firms should not accept or offer gifts: IBBI

The handbook comes at a time the authorities are concerned about the high number of liquidation of companies compared to those heading for successful resolution of bankruptcy. (Photo: iStock)Premium
The handbook comes at a time the authorities are concerned about the high number of liquidation of companies compared to those heading for successful resolution of bankruptcy. (Photo: iStock)

  • The Insolvency and Bankruptcy Board of India has in a handbook stated examples where offering or accepting gifts by insolvency professionals could seriously impair their ability to comply with the requirements of their role

NEW DELHI: Tribunal appointed professionals managing the affairs of bankrupt companies should not accept or offer gifts, the Insolvency and Bankruptcy Board of India (IBBI) said in a handbook of ethics released on Friday.

The handbook gives a set of examples where offering or accepting gifts by insolvency professionals could seriously impair their ability to comply with the requirements of their role.

The handbook comes at a time the authorities are concerned about the high number of liquidation of companies compared to those heading for successful resolution of bankruptcy.

The ‘handbook on ethics for insolvency professionals’ brought out by IBBI and the UK government to share global best practices point out that being an officer of court, these professionals are expected to show “utmost integrity" and are entrusted with effectively managing the corporate debtor as a going concern. Insolvency professionals’ job includes verification, accepting or rejection of claims by creditors and taking possession of assets and selling them. Gifts impair objectivity and integrity, the handbook said.

The handbook specifically flags instances that will affect the resolution professional’s work. These include accepting the hospitality of the financial creditor, accepting Diwali gifts from suppliers of the corporate debtor, offering gifts to government officials for obtaining their support in concealing certain non-compliance by the corporate debtor during the resolution process, and offering gifts or hospitality to the representatives of new investors inducing them to give false due diligence reports to their superiors.

Accepting gifts or hospitality from creditors whose claims are subject to verification and admission, or from the corporate debtor can cause serious threat to the independence of the insolvency professional, the handbook explained.

These specific examples elaborate on the code of conduct requirements defined in IBBI’s Insolvency Professionals Regulations of 2016.

“The strength and efficiency of a bankruptcy regime in India will remain undiluted only if the insolvency professionals observe high standards of professional ethics. A profession, eventually, is only as good as its members," the handbook noted.

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