The Insolvency and Bankruptcy Board of India (“IBBI”) has clarified on the nature of services that can be provided by an insolvency professional entity (“IPE”) and insolvency professionals (“IP”), vide its circular dated 6 July 2018 (available here). As per the circular:
IPEs to provide services to only IPs
- An IPE is recognised in accordance with regulation 12 (1) of the IBBI (Insolvency Professionals) Regulations, 2016, only if “its sole objective is to provide support services to the insolvency professionals, who are its partners or directors, as the case may be”.
- Thus, an IPE cannot provide any service to any person.
- It can provide only support services to the IPs who are its partners or directors. Thus, the role of IPE is clearly specified.
Only IPs can provided services of IPs and IPE cannot act as an IP
- Section 206 of the Insolvency and Bankruptcy Code, 2016 (“Code”) prohibits a person from rendering services as an IP unless he is: (a) enrolled as a member of an Insolvency Professional Agency (IPA), and (b) registered with the IBBI.
- Thus, no person other than a person registered as an IP with the IBBI can render services as an IP.
- An IPE is neither enrolled as a member of an IPA nor registered as an IP with the IBBI. It cannot act as IP under the Code.
In view of the aforementioned clarifications, given the role of an IPE, the IPEs are directed to refrain from seeking empanelment with or joining any panel of any market participant.