The Insolvency and Bankruptcy of India ( IBBI ) today prescribed fee and other expenses incurred for Corporate Insolvency Resolution Process as the Insolvency Professionals charges rs 1 crore to 5 Crores.
In April, the Board released a discussion paper on regulation of fee payable to insolvency professionals and other process costs under Corporate Insolvency Resolution Process and invited comments on the same.
In view of the comments received from the stakeholders, the Board directed the Insolvency Professionals to ensure that
- the fee payable to him, fee payable to an Insolvency Professional Entity, and fee payable to Registered Valuers and other Professionals, and other expenses incurred by him during the CIRP are reasonable;
- fee or other expenses incurred by him are directly related to and necessary for the CIRP;
- the fee or other expenses are determined by him on an arms’ length basis, in consonance with the requirements of integrity and independence;
- written contemporaneous records for incurring or agreeing to incur any fee or other expense are maintained.
- supporting records of fee and other expenses incurred are maintained at least for three years from the competition of the CIRP;
- approval of the Committee of Creditors (CoC) for the fee or other expense is obtained, wherever approval is required; and (g) all CIRP related fee and other expenses are paid through banking channel.
It was directed to ensure that no fee or expense other than what is permitted under the Code read with regulations made thereunder is included in the IRPC. Also, no fee or expense other than the IRPC incurred by the IP is borne by the corporate debtor; and only the IRPC, to the extent not paid during the CIRP from the internal sources of the Corporate Debtor, shall be met in the manner provided in section 30 or section 53.
The circular further clarified that the IRPC shall not include any fee or other expense not directly related to CIRP, any fee or other expense beyond the amount approved by CoC, where such approval is required, any fee or other expense incurred before the commencement of CIRP or to be incurred after the completion of the CIRP, any expense incurred by a creditor, claimant, resolution applicant, promoter or member of the Board of Directors of the corporate debtor in relation to the CIRP and any penalty imposed on the corporate debtor for non-compliance with applicable laws during the CIRP.
There have been instances of abnormally low fee charged by IPs. Recently, the National Company Law Appellate Tribunal, in the case of Metal Gems versus Saranya Forgings & Engineers India directed the Adjudicating Authority to fix the fee of the IRP, which shall be paid by the corporate debtor.To Read the full text of the Circular CLICK HERE