IBBI mandates Insolvency Professional to Disclose Relationship with Stakeholders within three days [Read Circular]

With a view to bringing transparency, the Insolvency and Bankruptcy Board of India (IBBI), in a circular issued on Tuesday, said that an Insolvency  Professional shall, within the time stipulated, should disclose his relationship with the following persons, namely, (i) the Corporate Debtor, (ii) other Professional(s) engaged by him, (iii) Financial Creditor(s), (iv) Interim Finance Provider(s), and (v) Prospective Resolution Applicant(s) to the Insolvency Professional Agency of which he is a member.

The Insolvency and Bankruptcy Code, 2016 read with regulations provide for the appointment of an insolvency professional [(Interim Resolution Professional (IRP) / Resolution Professional (RP)] to conduct the resolution process (Corporate Insolvency Resolution Process and the Fast Track Process) and discharge other duties. These authorize the Insolvency Professional to appoint registered valuers, accountants, legal and other professionals to assist him in the discharge of his duties in the resolution process.

For t5he above purpose, the ‘relationship’ includes the following four kinds of relationships at any time or during the three years preceding the appointment.

Firstly, Where the Insolvency Professional or the Other Professional, as the case may be, has derived 5% or more of his / its gross revenue in a year from professional services to the related party. Secondly, Where the Insolvency Professional or the Other Professional, as the case may be, is a Shareholder, Director, Key Managerial Personnel or Partner of the related party. Thirdly, Where a relative (Spouse, Parents, Parents of Spouse, Sibling of Self and Spouse, and Children) of the Insolvency Professional or the Other Professional, as the case may be, has a relationship of kind A or B with the related party. Fourthly, Where the Insolvency Professional or the Other Professional, as the case may be, is a partner or director of a company, firm or LLP, such as, an Insolvency Professional Entity or Registered Valuer, the relationship of kind A, B or C of every partner or director of such company, firm or LLP with the related party.

The circular mandates furnishing of disclosures on the website within three working days.

“The Insolvency Professional shall provide a confirmation to the Insolvency Professional Agency to the effect that the appointment of every other professional has been made at arms’ length relationship.,” the circular said.

It was further said that the disclosures shall be made in respect of ongoing resolution processes as to date and all subsequent resolution processes. The disclosures due on the date in respect of the ongoing processes shall be made to the respective Insolvency Professional Agency by 31st January 2018, it clarified.

“The Insolvency Professional shall ensure timely and correct disclosures by him and the other Professionals appointed by him. Any wrong disclosure and delayed disclosure shall attract action against the Insolvency Professional and the other Professional as per the provisions of the law,” it added.