IBBI modifies Code of conduct for IPs; now mandatory to disclose relationship with Corporate Debtor & related parties

Notification No. IBBI/2022-23/GN/REG088, dated 04-07-2022

The Government has notified the IBBI (Insolvency Professionals) (Amendment) Regulations, 2022 to further amend the IBBI (Insolvency Professionals) Regulations, 2016. As per the amended norms, the Insolvency Professional (IP) shall have to disclose his relationship, if any, with the corporate debtor, other professionals engaged by him, financial creditors, interim finance providers, and prospective resolution applicants to the insolvency professional agency within the prescribed timelines.

Further, an Insolvency Professional shall ensure disclosure of the relationship, if any, of the other professionals engaged by him with himself, the corporate debtor, the financial creditor, the interim finance provider, if any, and the prospective resolution applicant, to the insolvency professional agency of which he is a member, within the prescribed timelines.

For the purpose of these rules, “relationship” shall mean any one or more of the following four kinds of relationships at any time or during the three years preceding the appointment of other professionals:

(a) 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.

(b) 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.

(c) 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.

(d) 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 amended regulations also provide that the disciplinary proceedings under the IBBI (Insolvency Professionals) Regulations, 2016 shall be conducted in accordance with the provisions of the IBBI (Inspection and Investigation) Regulations, 2017.

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