Debt

Debt Financing

IBBI introduces new curbs on insolvency resolution professionals

Mint  

Insolvency resolution professionals hired by lenders to rescue bankrupt companies cannot continue in that role if any of their colleagues represent any of the parties in that case, says a new rule brought out by the Insolvency and Bankruptcy Board of India (IBBI). The change seeks to eliminate a potential conflict of interest that insolvency professionals in charge of steering a company through the bankruptcy process could have if any of their colleagues advise others involved in the case. It is significant because shareholders and creditors of a bankrupt firm would be trying their best to maximize their separate and often conflicting interests during the process. A director or a partner of an insolvency professional entity shall not continue as a resolution professional in a corporate insolvency resolution process if the entity or any other partner or director of such an entity represents any other stakeholder in that corporate insolvency resolution process, IBBI said. IBBI said in the amended regulation that the valuation professional hired by the insolvency resolution professional cannot be a relative or colleague of the professional, related party of the corporate debtor or an auditor of the company anytime in the preceding five years. The hiring of a valuer has to be on an arm's length basis.