IBBI (Model Bye-Laws & Governing Board of Insolvency Professional Agencies)-(Second Amendment) Regulations, 2022

The Insolvency & Bankruptcy Board of India (Model Bye-Laws & Governing Board of Insolvency Professional Agencies)-(Second Amendment) Regulations, 2022

The Insolvency and Bankruptcy Board of India issued a notification on October 31st 2022, Informing about the IBBI (Model Bye-Laws & Governing Board of Insolvency Professional Agencies)-(Second Amendment) Regulations, 2022. The Board included a few regulations and substituted them in the new Amendment.

Overview of the Insolvency and Bankruptcy Board of India

The Insolvency & Bankruptcy Board of India, or IBBI, was established on October 1^st, 2016, under the Insolvency and Bankruptcy Code 2016. It is responsible for regulating the laws and rules related to insolvency resolution and reorganization of corporates, firms, partnerships and Individuals in a time-bound way to increase the business value of an asset, promote entrepreneurship and credit availability and balance the interest of all the stakeholders.

The IBBI is a unique regulator as it regulates a profession and the process. It also has a regulatory insight over Insolvency professionals, agencies, entities and Information Utilities.

It also makes and regulates rules related to corporate insolvency resolution, Individual insolvency resolution, corporate liquidation and Individual bankruptcy under the code.

The IBBI has been designated as the “Authority” to regulate and develop the profession of valuers in India under the Companies (Registered Valuers and Valuation Rules), 2017 

Amendment to the IBBI (Model Bye-Laws & Governing Board of Insolvency Professional Agencies) Regulations, 2016

The Insolvency and Bankruptcy Board of India made a press release on November 1st 2022, regarding the Amendment of IBBI (Model Bye-Laws &  Governing Board of Insolvency Professional Agencies) Regulations, 2016, which lays down the governance structure and provides for the Model Bye-laws of the Insolvency professional agencies (IPA). The Board had issued three circulars incorporated by the Model Bye-Laws regulations. The Amendment has made no change in the list of infringements by the IP, and monetary penalties have also been introduced in the circulars.

Insolvency & Bankruptcy Board of India (Model Bye-Laws & Governing Board of Insolvency Professional Agencies)-(Second Amendment) Regulations, 2022

A notification was released by the Insolvency & Bankruptcy Board of India on October 31st, which notified about the Amendment of the IBBI (Model Bye-Laws & Governing Board of the Insolvency Professional Agencies) Regulations, 2016(also referred to as the Principal Regulations) which shall be called as Insolvency and Bankruptcy Board of India (Model Bye-Laws & Governing Board of Insolvency Professional Agencies)-(Second Amendment) Regulations, 2022.

According to the second Amendment, a few regulations have been amended in the principal rules, which are mentioned as follows-

Regulation 7 (3) in the principle regulation shall be substituted by.

(3) The Compliance officer must submit a compliance certificate annually to the Board in a format that the Board has prescribed. It must also be verified that the Insolvency professional agency has complied with sub-regulation regulations (1).

It must also be noted that the annual compliance certificate must be signed by the Insolvency professional agency’s managing director.

Clause 6 (3) is inserted after clause 6 (2) in the Principle regulation, stating that-

6(3)-

•  The Agency shall facilitate the receipt of relationship disclosures from its professional members according to the Insolvency & Bankruptcy Board of India (Insolvency professionals) regulations, 2016_[1].
• The Agency shall disseminate the disclosures on the website in the following format within 3 working days of receiving disclosure from its professional member.

The format of the disclosure of a relationship by an insolvency professional as introduced by the IBBI (Model Bye-Laws & Governing Board of Insolvency Professional Agencies)-(Second Amendment) Regulations, 2022 is as follows-

Disclosure of the relationship by Insolvency Professional

Disclosures by Insolvency professionals and other professionals which are appointed by the insolvency professionals conducting the resolution process of … (name of corporate debtor)

Insolvency experienced / other professionals engaged by the insolvency professional	Name of professional	Professional Membership number	Permanent account number (PAN)	Relationship with
				Interim resolution professional or resolution professional	Other professional (registered valuer or accountant or advocate / any other professional)	Corporate debtor	Name of the financial creditor (s)	Interim finance provider (s)	Name of prospective resolution applicant(s)
Interim resolution professional / resolution professional				NA
Registered valuer					NA
Accountant					NA		A
Advocate					NA
Any other professional (write kind of profession)					NA

After Clause 23 A, the following explanation is inserted-

“Explanation– A disciplinary proceeding shall be considered as a pending action against the professional member from the date on which a show cause notice has been issued to him by the Board or Agency, as the case may be, till the time it is disposed of by the Disciplinary Committee of the Board or Agency  as the case may be.”

In Clause 24 (2) (d), the following table shall be substituted-

Clause 24 (2) (d)- The Imposition of monetary penalty as per the table given below-

Sr. No.	Contravention-	Monetary Penalty
1	Failure to submit disclosures/ returns, etc. to the agency /submits inadequate /incorrect disclosures/returns, etc., relating to any assignment, as required under the Code & Regulations made thereunder or by-laws of the Agency or being called upon by the Board or the Agency.	Up to 1,00,000 Rs. / 25% of the fees, whichever is more. Subject to a Minimum of 50,000 Rs
2	Accepts an assignment having a conflict of interests with the stakeholders.	Up to 2,00,000 Rs. / 25% of the fees, whichever is more. Subject to a Minimum of 1,00,000 Rs
3	He fails to maintain records properly related to any of his assignments.	Up to 1,00,000 Rs. / 25% of the fees, whichever is more. Subject to a Minimum of 50,000 Rs
4	Rejects a claim without giving any reason while undertaking an assignment / fails to exercise due diligence in claim verification	Up to 2,00,000 Rs. / 25% of the fees, whichever is more. Subject to a Minimum of1,00,000 Rs
5	Fails to comply with the directions issued by Adjudicating Authority / the Appellate Authority	Up to 2,00,000 Rs. / 25% of the fees, whichever is more. Subject to a Minimum of 1,00,000 Rs
6	Outsources his duties and obligations	Up to 2,00,000 Rs. / 25% of the fees, whichever is more. Subject to a Minimum of 1,00,000 Rs
7	Fails to appoint registered valuers, wherever required, under the Code or Regulations made thereunder, for conducting a valuation.	Up to 2,00,000 Rs. / 25% of the fees, whichever is more. Subject to a Minimum of 1,00,000 Rs
8	Fails to supply the information called for / to comply with the requirements of information sought by the  Board, Agency, the Appellate Authority or Adjudicating Authority or does not cooperate with the inspection or investigating authority.	Up to 1,00,000 Rs. / 25% of the fees, whichever is more. Subject to a Minimum of 50,000 Rs
9	Fails to make a public announcement in the manner provided for in the relevant Regulations.	Up to 2,00,000 Rs. / 25% of the fees, whichever is more. Subject to a Minimum of 1,00,000 Rs
10	Fails to provide notice regarding meetings of creditors.	Up to 1,00,000 Rs. / 25% of the fees, whichever is more. Subject to a Minimum of 50,000 Rs
11	Accepts resolution plan from ineligible resolution applicants.	Up to 2,00,000 Rs. / 25% of the fees, whichever is more. Subject to a Minimum of 1,00,000 Rs
12	Fails to take action regarding preferential, undervalued, fraudulent or extortionate credit transactions.	Up to 2,00,000 Rs. / 25% of the fees, whichever is more. Subject to a Minimum of 1,00,000 Rs
13	Enters into contract/agreement with professionals in an incomplete and improper manner	Up to 1,00,000 Rs. / 25% of the fees, whichever is more. Subject to a Minimum of 50,000 Rs
14	Contravenes any provision of the bye-laws/ regulations for which no specific penalty has been provided.	Up to 1,00,000 Rs. / 25% of the fees, whichever is more. Subject to a Minimum of 50,000 Rs

Conclusion

The Insolvency & Bankruptcy Board of India (Model Bye-Laws & Governing Board of Insolvency Professional Agencies) Regulations-2016 were published in notification no. IBBI/2016-17/GN/REG001 on November 21st 2016. It has been amended by The Insolvency & Bankruptcy Board of India (Model Bye-Laws & Governing Board of Insolvency Professional Agencies)-(Second Amendment) Regulations, 2022, in notification no. IBBI/2022-23/GN/REG101, on October 31st 2022, introduced various substitutions and inclusions in the principal regulation.