IPEs can now act as insolvency professionals | The Financial Express

IPEs can now act as insolvency professionals

Move to improve management of large toxic assets during resolution process

IPEs can now act as insolvency professionals
Currently, 142 IPEs and thousands of insolvency professionals are registered with the IBBI. The changes are part of the IBBI (Insolvency Professionals) (Fourth Amendment) Regulations, 2022.

The Insolvency and Bankruptcy Board of India (IBBI) has tweaked norms to allow insolvency professional entities (IPEs), usually set up by a number of insolvency professionals (IPs), to also register as IPs and perform associated duties. Prior to the move, an IPE was only permitted to offer support services to an IP during the resolution of bad assets.

The latest decision will encourage many partnership firms, including legal ones, to get themselves registered as IPEs and participate in the resolution of large toxic assets — something that can potentially be a lucrative business opportunity for them, according to some analysts. At the same time, it will help expedite the resolution of large stressed firms, enable better management of such companies during the resolution period and help prevent assets from witnessing value erosion.

Currently, 142 IPEs and thousands of insolvency professionals are registered with the IBBI. The changes are part of the IBBI (Insolvency Professionals) (Fourth Amendment) Regulations, 2022.

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Hailing the IBBI move, Pritika Kumar, founder of Cornellia Chambers, said, “Since an IP takes on the tasks of an entire board of directors of a company undergoing insolvency proceedings, it is not possible for an individual to complete every task necessary to resuscitate a company optimally due to lack of time and specific expertise.”

The object of the Insolvency and Bankruptcy Code (IBC) is to revive a business and individuals serving as IPs might have limitations while dealing with the multifarious issues that pop up in a company’s operations due to lack of time and, in certain cases, expertise, Kumar said. However, IPEs usually have corporate governance and risk management structures in place and may not face such limitations due to their institutionalised nature, she added.

Anoop Rawat, partner (Insolvency & Bankruptcy) at Shardul Amarchand Mangaldas & Co, said, the regulation introduced a much-awaited mechanism for institutional engagement for the corporate insolvency resolution process (CIRP) under the IBC. “Institutional appointment as IPE is a robust and reliable structure and instils credibility and confidence amongst the stakeholders. It would surely bring in more efficiency and professional approach in solving the CIRP,” he said.

This is the latest in a series of changes in regulations undertaken by the IBBI in recent weeks to cut delays in the resolution of stressed firms and maximise the valuation of such assets. Recently, the IBBI tweaked its regulation to allow part-sale of toxic assets in select cases. It also allowed the marketing of toxic assets to generate greater investor interest.

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