IBBI proposes limiting number of assignments handled by IPs to check delays

The IBBI has floated a discussion paper seeking comments from the industry on this matter by July 25; Discussion paper limits maximum assignments to 5

The insolvency regulator has proposed restricting the number of assignments handled by an insolvency professional (IP) to five, saying a few of them are handling too many assignments under the IBC.

The Insolvency and Bankruptcy Board of India (IBBI) has floated a discussion paper seeking comments from the industry, by July 25, on this matter, “given the expansive and intense responsibilities of an IP in corporate processes”.

“The restriction will put a check on undesirable instances of delay and disturbance to the processes led by IPs,” the discussion paper said. IBBI has devised a matrix to decide the number of assignments an IP can undertake. For instance, an IP cannot take more than one insolvency case where the turnover of corporate debtor is more than Rs 50,000 crore. The person can undertake two assignments if they both have turnover less than Rs 10,000 crore. 

The proposal limits the maximum cases to five, provided the turnover of the corporate debtor in each is less than Rs 1,000 crore. IBBI is of the view that the move will attract more talent towards the IP profession.

IBBI has drawn from various orders of the SC and the National Company Law Tribunal to draft the proposal.

For instance, NCLT’s Hyderabad Bench in the matter of IDBI Bank versus Lanco Infratech said, “...we agreed with the submissions of the respondents considering his previous three assignments to large companies and the current corporate debtor itself is a large company and we are of the prima facie view that the proposed IRP would not find sufficient time to act as IRP for the respondent company.”