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IBBI proposes to restrict the number of assignments to be handled by Insolvency Professionals
The Insolvency and Bankruptcy Board of India (IBBI) recently came out with a discussion paper with regard to restricting the number of assignments that are handled by Insolvency Professionals (IPs) under the Corporate Insolvency Resolution Process (CIRP) and Liquidation (including Voluntary Liquidation) Process under the Insolvency and Bankruptcy Code, 2016 (Code).
Presently, neither the Code nor the IBBI has put any restriction on the number of assignments that an IP can handle at a given point of time. However, the Code of Conduct for IPs provides that IPs must refrain from accepting too many assignments if he/she is unlikely to be able to devote adequate time to each of his assignments.
Proposed Restriction As per the IBBI, a few IPs are handling too many assignments under the Code, which could be detrimental in the long run.On comparing the roleof an IP with that of a managing director of a company, and on considering the expansive and intense responsibilities of an IP in corporate processes, the IBBI has proposed the maximum number of assignments that can handled by IPs: 5 assignments if the turnover of the corporate debtor is less than Rs 1000 crore; 4 assignments if the turnover is between Rs 1,000 crore – Rs 5,000 crore; 3 assignments for turnover l between Rs 5,000 – Rs 10,000 crore; 2 assignments in case the turnover is above Rs 10,000 crore but below Rs 50,000 crore; 1assignment in case of turnover of corporate debtor being Rs 50,000 crore. According to the IBBI, the proposed restrictions on IPs will put a check on undesirable instances of delay and disturbance to the processes under the Code. With limits in place, the IBBI expects the quality of output to improve; which will in turn facilitate inter alia realisation of the objective of value maximization as set out in the Code. Further, this will be conducive for development of market for professionals as more talent will be drawn towards IP profession.
The IBBI has sought comments from the public by 25 July, 2020.