IBBI clarifies Resolution Plan Implementation and Billing Compliance for IPs [Read Circular]

The Insolvency and Bankruptcy Board of India ( IBBI ) has issued clarification regarding the professional service rendered by an IP in implementation of the resolution plan approved by the Adjudicating Authority along with compliance regarding billing / invoicing for services availed by IP from professionals on 1st February 2024. The circular is being issued in exercise of the powers conferred under the provisions of section 196 of the Insolvency and Bankruptcy Code, 2016. An Insolvency Professional ( IP ) assumes different roles and performs various functions under The Insolvency and Bankruptcy Code, 2016 (Code). The Code empowers an IP to appoint accountants, legal or other professionals to effectively discharge its functions. The IP can also avail support services from an insolvency professional entity (IPE). The fee to such professionals, fee to IPE and other expenses incurred by the IP form part of the respective process costs. Section 208, combined with IP Regulations, mandates IPs to follow a Code of Conduct specified in the First Schedule, ensuring principles like integrity and impartiality. To enhance clarity, feedback-driven updates have been detailed to facilitate efficient process conduct. Clarification in relation to rendering professional service by an IP in implementation of the resolution plan approved by the Adjudicating Authority Regulation 2(1)(a) of IP Regulations defines 'assignment' as any role an IP undertakes under the Code, such as interim resolution professional, resolution professional, liquidator, bankruptcy trustee, authorized representative, or in any other capacity. Clause 23A of the Code of Conduct in the First Schedule to IP Regulations mandates a one-year cooling-off period for IPs, preventing them from seeking employment or providing professional services to related stakeholders like the corporate debtor, certain creditors, successful resolution applicants, and their relatives after concluding an assignment. Regulation 38 of IBBI ( Insolvency Resolution Process for Corporate Persons ) Regulations, 2016, outlines mandatory elements of the resolution plan, including its implementation schedule, business management, control during the corporate debtor's term, and effective supervision of its execution. In various instances, it has been observed that the Adjudicating Authority (AA) approves resolution plans with provisions for implementing or monitoring committees, ensuring the plan's effective execution and sound management of the corporate debtor during the transition. IPs, familiar with the business nuances, are typically assigned roles in these committees. Clarification: In order to facilitate smooth implementation of the resolution plan, it is hereby clarified that an IP may render professional service in relation to implementation of resolution plan approved by the AA, provided details of such service are mentioned in the resolution plan approved by the AA. Clarification on compliance regarding billing / invoicing for services availed by IP from professionals Clause 25C of the Code of Conduct outlined in the First Schedule to IP Regulations mandates that an IP ensures the IPE or the engaged professional bills or invoices their fees in their name, with payments conducted through the banking channel. It's important to highlight that, as per the terms of engagement or prevailing market practices, the bill or invoice may also be issued in the name of the firm where the individual professional appointed by the IP is a partner. Therefore, it is deemed wise to clarify that issuing the bill or invoice in the name of the firm would sufficiently comply with the regulation by the IP. Clarification: It is hereby clarified that for the purposes of clause 25C of Code of Conduct specified in First Schedule to IP Regulations, the bill or invoice may be raised in the name of the IPE or the professional or the firm in which such professional is a partner. Also read: IBBI Incorporates Fresh Provisions for Insolvency Professionals’ Assignment Resignation Support our journalism by subscribing to Taxscan premium. Follow us on Telegram for quick updates

IBBI clarifies Resolution Plan Implementation and Billing Compliance for IPs [Read Circular]

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