OVERVIEW OF THE EXISTING ETHICAL &

REGULATORY FRAMEWORK FOR INSOLVENCY

PROFESSIONALS

OVERVIEW OF THE EXISTING ETHICAL &

REGULATORY FRAMEWORK FOR
INSOLVENCY PROFESSIONALS

8
The provisions of the Insolvency & Bankruptcy Code lay down an effective ecosystem for

implementation of its provisions which consists of four pillars:

a) Adjudicating Authorities (the National Company Law Tribunals), where corporate

insolvency matters shall be heard;
b) IBBI, which has regulatory oversight over insolvency professionals and insolvency
professional agencies;
c) Insolvency Professionals who play a key role in the efficient working of the insolvency and
bankruptcy process under the IBC; and
d) Information Utilities (IUs) which electronically store facts about lenders and terms of
lending and evidence of default

Apart from the above, the Disciplinary Committee set up by the IBBI and the Insolvency
Professional Agencies also play a crucial role in ensuring that the IPs adhere to ethical standards
and the Code of Conduct.

1 2
Adjudicating Authority Insolvency & Bankruptcy
Disciplinary Committee
(NCLT) Board of India
(set up by IBBI)

3 4
Insolvency Professional
Information Utilities
5 Agencies

Insolvency Professionals

Overview of the Existing Ethical and Regulatory

Framework for Insolvency Professionals
9
A. Insolvency and Bankruptcy Board of India (IBBI)

 The IBBI is a key pillar of the insolvency and bankruptcy institutional infrastructure. It was
envisioned as the supervisor of the institution of insolvency professionals, as well as other
regulatory entities, for the overall insolvency and bankruptcy process in the country.
 It is the custodian of the IBC law and is responsible for consolidation and amendment of the
law, as required, and has regulatory oversight over the Insolvency Professionals, Insolvency
Professional Agencies, Insolvency Professional Entities, and Information Utilities. It also
acts as a regulator that writes down the norms by way of regulations for the insolvency and
bankruptcy process but does not per se partake in the process.
 The processes under the Code are private affairs of corporates and individuals. IBBI does
not get into any financial or strategic business IBBI is the key pillar of the
decisions of either the persons in distress or the insolvency and bankruptcy
ones whose financial exposure is in distress. institutional framework
However, it facilitates smooth conduct and
processes for the stakeholders by making regulations, within the secondary legislative
powers offered by the Code. By registering the professionals and monitoring their
performances during the processes, IBBI exercises executive functions. It carries out
investigation and inspection of the insolvency professionals and professional entities for
alleged violations of the law, thereby discharging adjudicatory functions. While disciplining
the professionals who contravene the regulations during the process, IBBI assumes quasi-
judicial functions as well. Needless to mention that the IP should, at all times, expedite co-
operation and timely provision of information as required by the IBBI.
 The Board largely performs 3 key functions:
- Executive: Registering and regulating the service providers for the insolvency process
and taking measures for professional development and expertise for the market players
through education, examination, training, and continuous professional education.
- Quasi-judicial: Adjudication of service providers for ensuring their orderly growth,
development, and functioning.
- Legislative: Making regulations for market intermediaries (service providers) and
processes.

Overview of the Existing Ethical and Regulatory

Framework for Insolvency Professionals
10
 B. Insolvency Professional Agencies (IPAs)
 IPAs are self-regulating professional bodies that focus on developing the profession of
insolvency professionals. The IBBI has oversight over the functioning of IPAs who in turn
regulate the functioning of Insolvency Professionals and monitors their performance under
the IBC1. IPAs carry out functions in furtherance of their powers as prescribed in the IBC,
including2:
- regulatory functions, such as drafting detailed standards and codes of conduct that are
made public and are binding on all members;
- executive functions, such as monitoring, inspecting and investigating members,
gathering information on the performance of insolvency professionals;
- quasi-judicial functions, such as addressing grievances of aggrieved parties, hearing
complaints against members and taking suitable actions.
 The Model Bye-Laws of an IPA require the IPA to continuously improve upon its internal
regulations and guidelines to ensure that high standards of professional and ethical conduct
are maintained by its professional members. It further recommends the IPAs to form an
Advisory Committee of professional members of the IPA to advise the IPA on the matters
related to standards of professional and ethical conduct.
 At present, there are 3 IPAs promoted by the Institute of Chartered Accountants of India,
the Institute of Company Secretaries of India, and the Institute of Cost Accountants of India
respectively.
 IPAs develop professional standards and code of ethics under the Code, audit the
functioning of their members, discipline them and take actions against them if necessary.
 The Code mandates monitoring of the performance of IPs with respect to legal compliance
and empowers IPAs to call for information and records.
 As part of this, an IP, inter alia, is required to file the following key disclosures with respect
to each of his on-going assignments:
- Month end disclosures on the status / progress of CIRP (progress reports)
- Relationship disclosures (vide IBBI Circular no. No. IP/005/2018) with legal counsel,
financial creditors, resolution applicants, valuers, other appointed professionals etc, at
various milestones of the CIRP

1
Report of the Bankruptcy Law Reforms Committee Volume I: Rationale and Design, November 2015.
2
Ibid
Overview of the Existing Ethical and Regulatory
Framework for Insolvency Professionals
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