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IBC | Legislative Alert | IBBI directs resolution professional to not outsource responsibilities, ensure compliance with applicable laws, use registered address and number

Jan2018

Corporate & Commercial

The Insolvency and Bankruptcy Board of India (“IBBI”) has issued three (3) circulars on the following obligations being imposed on the insolvency professionals:

1. Insolvency professional not to outsource his responsibilities. The circular (available here) directs all insolvency resolution professionals to not outsource any of their duties and responsibilities under the Insolvency and Bankruptcy Code, 2016 (“Code”) to any third party. The afore-mentioned direction has come in light of the cases being observed where few insolvency professionals are advising the prospective resolution applicants to submit a certificate from another person to the effect that such applicants are eligible to be resolution applicants. The circular directs that the insolvency resolution professionals shall not require any certificate from another person certifying eligibility of a resolution applicant.

The aforementioned circular has come in the aftermath of the Insolvency and Bankruptcy Code (Amendment) Ordinance, 2017, which is being superseded by the Insolvency and Bankruptcy Code (Amendment) Bill, 2017, which provides for various grounds of disqualification of a resolution applicant.

2. Insolvency professional to ensure compliance with provisions of the applicable laws. The circular (available here) directs that while acting as an interim resolution professional, a resolution professional, or a liquidator for a corporate person under the Code, shall exercise reasonable care and diligence and take all necessary steps to ensure that the corporate person undergoing any process under the Code complies with the applicable laws. For example, a corporate person undergoing insolvency resolution process, if listed on a stock exchange, needs to comply with every provision of the Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015, unless the provision is specifically exempted by the competent authority or becomes inapplicable by operation of law for the corporate person.

The circular also clarifies that:

– if a corporate person during any of the aforesaid processes under the Code suffers any loss, including penalty, if any, on account of non-compliance of any provision of the applicable laws, such loss shall not form part of insolvency resolution process cost or liquidation process cost under the Code;

– the insolvency professional will be responsible for the non-compliance of the provisions of the applicable laws if it is on account of his conduct.

The aforementioned circular reinstates the duty of the resolution professional to ensure that the provisions of all applicable laws are complied with during the corporate insolvency resolution process.

3. Insolvency professional to use Registration Number and Registered Address in all his communications. This circular (available here) being procedural in nature directs that:

(i) the insolvency professional shall in all his communications, whether by way of public announcement or otherwise to a stakeholder or to an authority, an insolvency professional prominently state:

(a) his name, address and email, as registered with the IBBI;
(b) his Registration Number as an insolvency professional granted by the IBBI; and
(c) the capacity in which he is communicating (Example: As Interim Resolution Professional of XYZ Limited, As Resolution Professional of ABC Limited, etc.).

(ii) An insolvency professional may use a process (Example: CIRP, Liquidation, etc.) specific address and email in its communications, if he considers it necessary subject to the conditions that: (i) the process specific address and email are in addition to the details required above, and (ii) the insolvency professional continues to service the process specific address and email for at least six months from conclusion of his role in the process.

The aforementioned circular has come in view of IBBI’s observations that a few insolvency professionals are using different addresses and emails while communicating with the stakeholders.

Please feel free to reach us for views / questions / queries at ibcupdate@elp-in.com.

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