Engaging with matters related to insolvency resolution necessitates the involvement of professionals known as ‘Insolvency Professionals.’ These individuals are mandated to register with an entity referred to as the ‘Insolvency Professional Agency.’
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Definition of Insolvency Professional Agency
As per section 3(20) of the Insolvency and Bankruptcy Code, 2016, an Insolvency Professional Agency is any entity registered with the Insolvency and Bankruptcy Board of India (IBBI) under section 201. These agencies are tasked with developing professional standards, a code of ethics, and acting as the primary regulatory authority for their affiliated Insolvency Professionals. Leading professional bodies such as ICAI, ICSI, and ICMA have already established section 8 companies and registered as Insolvency Professional Agencies.
Registration Process for Insolvency Professional Agency
The Insolvency and Bankruptcy Board of India (Insolvency Professional Agency) Regulations, 2016 outlines the requirements for the registration of an Insolvency Professional Agency. The agency must be incorporated as a section 8 company with a minimum net worth of Rs. 10 Crores and a paid-up capital of Rs. 5 Crores. Importantly, it should not be a subsidiary of another subsidiary.
Functions of Insolvency Professional Agency
Section 204 of the Insolvency Code, effective from 15-11-2016, specifies the functions of an Insolvency Professional Agency, including:
- Granting membership to insolvency professionals.
- Establishing standards of professional conduct for its members.
- Monitoring the performance of its members.
- Safeguarding the rights, privileges, and interests of insolvency professionals.
- Suspending or canceling membership.
- Redressing grievances of members.
- Publicizing information about its functions, the list of members, and the performance of its members.
Applications for registration as an Insolvency Professional Agency must be submitted to the IBBI in the prescribed form with the required fees. Initially, in-principle approval will be granted for one year, during which the formal registration application should be submitted to the IBBI.
Model Bye Laws and Regulation of Insolvency Professional Agency
Model Bye Laws and regulations regarding the Governing Board of Insolvency Professional Agencies are specified in the Insolvency & Bankruptcy Board of India Regulations, 2016, effective from 21-11-2016. Notably, an Insolvency Professional must be a ‘professional member’ of the respective Insolvency Professional Agency. Duties of Professional Members are clearly outlined in the Regulations.
The Insolvency Professional Agency is also required to establish a Grievance Redressal Mechanism and has the authority to initiate disciplinary proceedings against its professional members.
IBBI’s Oversight on Insolvency Professional Agency
The IBBI maintains control over both Insolvency Professional Agencies and individual Insolvency Professionals. Complaints can be lodged with the IBBI under section 217 of the Insolvency Code. The board is empowered to conduct investigations into the activities of Insolvency Professional Agencies and Insolvency Professionals under section 218. Disciplinary actions can be taken by appointing a disciplinary committee under section 220 of the Insolvency Code. All relevant sections mentioned above have been notified and made effective as of 15-11-2016.