IBBI to fix minimum fee slabs from Oct 1 for insolvency professionals

The Insolvency and Bankruptcy Board of India (IBBI) has prescribed minimum fee slabs for resolution professionals representing bankrupt firms from October 1 onwards so that such professionals are adequately compensated.

Resolution professionals(RP) are enrolled with IBBI and they are involved in the dissolution process of an insolvent individual or firm. These professionals are authorised to act on behalf of such insolvent entities.

The change attempts to secure the financial independence of such professionals who have to take important decisions to address the interests of both lenders and borrowers during the insolvency process.

Simran Nandwani, Resident Counsel of Cornellia Chambers says the introduction of a minimum fee structure for these professionals was long due, and the same had been observed by company law tribunals and courts. “This move will ensure that no time is wasted in negotiating the fees of such professions and ensure the insolvency process is conducted in a time-bound manner,” she said.

Apart from securing the independence of the professions, the new rules have also paved the way to allow lenders to pay resolution professionals based on how soon a resolution plan is finalised.

The performance-linked incentive fees introduced by this amendment will be a motivating factor for the professionals to strive towards achieving quick resolution of insolvent firms, Nandwani said.

The rules meanwhile lay down that the RPs shall not share any fees or charges from any professional or support service providers who are appointed under the processes. Sometimes, other service providers help the RPs with the resolution process of insolvent firms. The new rules have ensured a clear bifurcation is made between the fees of the insolvency professions and the fees of any other professional giving support services.

As per the new rules, when the claim admitted is ₹50 crore or less, the minimum monthly fee to the insolvency professional should be ₹1 lakh. If the admitted claim is between ₹50 crore to ₹500 crore, the minimum fee should be ₹2 lakh a month. The regulator has specified five such slabs of fee payment which are as follows:

Circular regarding pending cases in courts

The IBBI also issued a circular observing that it was not made a party in a few matters pending in the Supreme Court and High Courts.

The insolvency regulator has told Insolvency Professionals to proactively inform IBBI without any delay about any important issues relating to the Insolvency and Bankruptcy Code before the courts.

“For pending cases, the case papers with issues involved in brief shall be forwarded to IBBI at the email legal.proceeding@ibbi.gov.in by September 2022 and for any future case promptly when the case comes to notice/ knowledge of the Insolvency Professional,” IBBI circular said.