Model Bye-Laws and Governing Board of Insolvency Professional Agencies (Amendment) Regulations 2021 notified by IBBI

Laws and Governing Board of Insolvency Professional Agencies
Shivani Jain
| Updated: Jan 25, 2021 | Category: News

Recently, the Insolvency and Bankruptcy Board of India, by way of powers conferred under section 196, 203, and 205, together with section 240 of the IBC 2016 has amended certain provisions of the Model Bye-Laws and Governing Board of Insolvency Professional Agencies Regulations 2016. Further, the said amendment will be termed as Model Bye-Laws and Governing Board of Insolvency Professional Agencies (Amendment) Regulations 2021. The said rules will come into force from the date of publication in the official gazette, 14.01.2021.

In this blog, we will discuss in detail about the key changes bought through the Model Bye-Laws and Governing Board of Insolvency Professional Agencies (Amendment) Regulations 2021.

Concept of Insolvency and Bankruptcy Code 2016

Having one codified legislation is better than to have multiple legislation to deal with different aspects of a company. In the same manner, the term Insolvency and Bankruptcy Code 2016 denotes comprehensive legislation that works as a single umbrella for the companies incorporated in India. Also, the same has repealed the provisions of SICA as well. The term SICA stands for Sick Industrial Companies Act. Further, the said act came into force on 28.05.2016.

Concept of Insolvency Bankruptcy Board of India

The term Insolvency Bankruptcy Board of India or IBBI denotes a board formulated under the provisions of the Insolvency and Bankruptcy Code 2016. The said board is the topmost authority established under the act. Further, the same acts as the regulator for the companies as well.

The main objective of this board is to achieve the goals and objectives of the Insolvency and Bankruptcy Code 2016.

Concept of Insolvency Professional Agency

The term “Insolvency Professional Agency” means an agency established under the provisions of section 201 of the IBC 2016. The said agency is established with the Insolvency Bankruptcy Board of India under the Code. However, the same is administered and regulated by IBBI.

Further, the key functions of the said agency are to regulate and administer the activities of the Insolvency Professionals, and to ensure the development and growth in the industry as well.

Also, it is compulsory for these professionals to comply with the provisions of the IBC 2016, together with the terms and conditions specified under the Model Bye-Laws and Governing Board of Insolvency Professional Agencies Regulations 2016.

Changes made in Model Bye-Laws and Governing Board of Insolvency Professional Agencies (Amendment) Regulations 2021

The key changes made in the Model Bye-laws and Governing Board of Insolvency Professional Agencies (Amendment) Regulations 2021 are as follows:

Amendments Made in Regulation 5

The key amendments made in Regulation 5 are as follows:

Insertion of Sub Regulation 4A

The said sub rule will be added after sub regulation 4 and states that to become a shareholder or director of Insolvency Professional Agency, one needs to fulfil the eligibility criteria norms, comprising of qualification and experience, as decided by the Governing Board.

Substitution in Clause (b) in Sub Regulation 6

IBBI or Insolvency and Bankruptcy Board of India has decided to substitute the explanation of clause (b) of sub regulation 6, which deals with the qualification for the directors of Insolvency Professional Agency, with the content as follows:

(b) “who has expertise in the field of law, finance, accountancy, economics, valuation, insolvency or management.”

Insertion of Sub Regulation 14

The said sub rule will be added after sub regulation 13 and states that the director has the power to disclose any order given by any authority that affects his/her reputation or character with the Insolvency Professional Agency. Further, the same must be done within one week from the date of issue of such order.

However, such sub regulations have two provisos which are as follows:

  1. That the copy of the order passed must be placed on the official portal of the Insolvency Professional Agency;
  2. That such a person will cease to be the director of the Insolvency Professional Agency, if the order disqualifies him to be the director of a company;

Insertion of Regulation 6

IBBI or Insolvency and Bankruptcy Board of India has decided to insert a new regulation named Self Evaluation after the Regulation 5B. The said regulation states that the Governing Body has the power to evaluate the performance of the IPA (Insolvency Professional Agency) within three months from the end of the financial year. Also, it is necessary for the IPA to publish a report of self evaluation on its website.

Insertion of Regulation 7

The last regulation inserted by the IBBI in the Model Bye-Laws and Governing Board of Insolvency Professional Agencies (Amendment) Regulations 2021 relates to Compliance Officer. As per the said regulation, the IPA or Insolvency Professional Agency needs to designate a compliance officer who will be responsible for ensuring the compliance of the provisions of the IBC and the regulations and guidelines made thereunder.

Further, such a compliance officer will report to the IBBI[1] in case of any non-compliance or violation. Also, it is mandatory for the appointed compliance officer to submit a certificate of compliance with the Board on an annual basis. However, the same will be furnished only, if the compliance officer is satisfied that the Insolvency Professional Agency has duly complied with all the provisions mentioned under sub rule (1). Also, it shall be taken into consideration that the said certificate needs to be signed by the Managing Director of Insolvency Professional Agency on a compulsory basis.

Lastly, only the Governing Body has the power to remove the appointed Compliance Officer, that, too by passing a resolution in the Meeting.

Conclusion

In a nutshell, Insolvency Professional Agency is an agency established under the provisions of section 201 of the IBC 2016. The same is administered by IBBI. Further, the main functions of IPA include administration of the working of Insolvency Professionals. Further, the main reason behind the amendment made in the Model Bye-Laws and Governing Board of Insolvency Professional Agencies Regulations 2016 was to infuse more transparency and clarity in the operations, management, and affairs of the Insolvency Professional Agency.

Also, the said amended rules will now be known as Model Bye-Laws and Governing Board of Insolvency Professional Agencies (Amendment) Regulations 2021.

Lastly, in case of any other doubt or dilemma, reach out to Swarit Advisors, our proficient and experienced CAs and CSs are there to cater to all your doubts and queries.

Also, Read: What are the Major Risks Faced by Micro Finance Company in India?

Copy of the Official Notification

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Shivani Jain

Shivani has completed her B com LLB (Hons) and has the experience of writing various research papers during her college time. Earlier she was working as an Associate in a Delhi based Law Firm, but her interest in writing made her pursue Legal Content Writing as a career. Her core area of interest is in writing about various legal enactments, tax, and finance.

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