An Ownership and Governance Structure of India’s Insolvency Professional Agencies

Owing to frequent personal and corporate insolvency cases and high average time taken for resolution of such cases in India, the legal framework for bankruptcies was revisited. Erstwhile piece-meal legislations like Presidency towns insolvency act 1909, Provincial insolvency act 1920, Companies act 1956, Sick industries companies act 1985, Recovery of debts due to banks and financial institutions 1995 and Securitization and reconstruction of financial assets and enforcement of security interest act 2002 were relooked comprehensively, thereafter resulting into the Insolvency and Bankruptcy Code of India 2016 enacted by Indian Parliament. The Code deals with insolvency of individuals, corporate and partnership firms and lays down a time-bound procedure for resolution of such cases with the help of insolvency professionals. The Insolvency and Bankruptcy Board of India, hereafter referred as IBBI, was constituted as the regulator empowered to register insolvency professionals and insolvency professional agencies and as the guardian of information utilities. Under the Code, the insolvency professional agencies are envisaged as frontline implementation vehicles that will have a corporate identity as section 8 company, vide Companies Act 2013, for maintaining fair competition among them in insolvency resolution. However, the ownership, governance structure and empowerment of insolvency professional agencies are not defined in the Code. IBBI (Model Bye-Laws and Governing Board of Insolvency Professional Agencies) regulations 2016 provide guidance on the bye-laws, governance model and constitution of insolvency professional agencies. IBBI (Insolvency Professional Agencies) regulations 2016outlines the procedure for registration, approval, surrender and cancellation of insolvency professional agencies. This paper discusses the insolvency administration and governance models of bodies equivalent to insolvency professional agencies in Canada, Singapore and United Kingdom. It assesses the prevalent models abroad based on parameters of composition and independence of governing board, management structure, regulatory oversight and business operating model. The author summarizes the cross-country experiences and suggests a suitable and effective model for ownership and governance of India's insolvency professional agencies.