With the notification of the Insolvency and Bankruptcy Code, 2016, on May 28, 2016, matters pertaining to the reorganisation and insolvency resolution of corporate persons, partnership firms and individuals would now be regulated by a specialized regulatory body, i.e. the Insolvency and Bankruptcy Board of India (IBBI). Firstly, the Ministry of Corporate Affairs has notified numerous provisions of the Code by its Notifications dated November 01, 2016 and November 15, 2016, including:
- Powers and functions of IBBI
- Amendments made to inter-alia the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002; Payment and Settlement Systems Act, 2007; Limited Liability Partnership Act, 2008; Companies Act, 2013, Central Excise Act, 1944; Customs Act, 1962; Income- tax Act, 1961; and the Finance Act, 1994 in the manner specified in the corresponding Schedules to the Code;
- Provisions governing insolvency professional agencies and insolvency professionals.
Secondly, on November 21, 2016, IBBI notified two sets of Regulations establishing the regulatory governing insolvency professional agencies. The Code introduced the concept of ‘qualified insolvency professionals’ for the insolvency resolution to be streamlined and conducted in a time bound manner, as such professionals would serve as crucial intermediaries for smooth implementation of the insolvency resolution process.
The Insolvency and Bankruptcy Board of India (Insolvency Professional Agencies) Regulations, 2016, lays down the eligibility criteria for an entity to qualify as an ‘insolvency professional agency’ and receive a certificate of registration. Important eligibility requirements include a minimum net worth requirement of INR 10 crore and minimum paid-up share capital of INR 5 crore.
Only up to 49% of the share capital of an insolvency professional agency is permissible to be held, directly or indirectly, by persons resident outside India and control of such entity should not vest with persons resident outside India. Further, the entity should qualify as a ‘fit and proper’ person (for instance, demonstrate an absence of convictions) and has adequate infrastructure to discharge its functions effectively, including qualified employees having adequate professional experience.
The Insolvency and Bankruptcy Board of India (Model Bye-Laws and Governing Board of Insolvency Professional Agencies) Regulations, 2016, lays down a set of model bye-laws. The bye-laws adopted by an insolvency professional agency are required to be consistent at all times with these model bye-laws. The bye-laws address ethical and professional standards, implementation of a monitoring policy and grievance redressal mechanism to monitor the conduct of members of such agency.