The Insolvency and Bankruptcy Code, 2016 (hereinafter referred to as the ‘Code’) received the assent of the President of India on May 28, 2016. The code was enacted to consolidate and amend the laws relating ‘to reorganization and insolvency resolution of corporate persons, partnership firms and individuals in a time bound manner for maximization of value of assets of such persons, to promote entrepreneurship, availability of credit and balance the interests of all the stakeholders including alteration in the order of priority of payment of Government dues and to establish an Insolvency and Bankruptcy Board of India, and for matters connected therewith or incidental thereto.’
Under the Section 240 of the Code, the powers of the Insolvency and Bankruptcy Board of India (hereinafter referred to as the ‘Board’) have been listed. According to the Section, the Board may, by notification, make regulations consistent with this Code and the rules made thereunder, to carry out the provisions of the code as listed in Section 196 and Section 200, in regard with the Insolvency Professional Agencies and utilities.
In November 2016, the IBBI, in exercise of its powers conferred under Section 240 of the Code, had notified the Insolvency and Bankruptcy Board of India (Insolvency Professionals) Regulations, 2016. These regulations inter alia provide for registration, regulation and oversight of insolvency professionals under the Code. These regulations came into effect from November 29, 2016.
According to these regulations, the following categories of individuals are eligible for registration as an insolvency professional:
(a) Advocates, Chartered Accountants, Company Secretaries and Cost Accountants with 10 years’ of post-membership experience (practice or employment) or a Graduate with 15 years’ of post-qualification managerial experience, on passing the Limited Insolvency Examination.
(b) Any other individual on passing the National Insolvency Examination.
However, Advocates, Chartered Accountants, Company Secretaries and Cost Accountants with more than 15 years’ of practice experience may seek registration, without any examination but by getting registered under the Code.
A limited liability partnership, a registered partnership firm and a company may be recognized as an insolvency professional entity if a majority of the partners of the limited liability partnership or registered partnership firm or a majority of the whole-time directors of the company are registered as insolvency professionals under the Code. An insolvency professional may use the organizational resources of a recognized insolvency professional entity subject to the condition that the entity as well as the insolvency professional shall be jointly and severally liable for all acts of omission or commission of its partners or directors as insolvency professionals.
On March 6, 2017, The Insolvency and Bankruptcy Board of India (IBBI) recognised two Insolvency Professional Entities (IPEs) in exercise of its power under section 240 of the code and Regulation 5 of the Insolvency and Bankruptcy Board of India (Insolvency Professionals) Regulations, 2016. The two recognised IPEs are IRR Insolvency Professionals Private Limited and AAA Insolvency Professionals LLP.