Insolvency professionals bound to disclose relationship with associated parties
Published: Jan 17, 2018
By TIOLCORPLAWS News Service
NEW DELHI, JAN 17, 2018: IN the interest of transparency, the Insolvency and Bankruptcy Board of India (IBBI) has mandated that an insolvency professionals will now have to disclose their relationship with all associated parties including the corporate borrower and lenders within three days of his appointment.
Therefore, if an insolvency professional has any relation with the corporate debtor, the company under insolvency proceedings for default, he or she will have to disclose this within three days of appointment as an interim resolution professional. Similarly, if the specialised person is in relation with any financial creditor, who lent money to the defaulting borrower, the same norm applies at the time of forming the committee of creditors (COC).
The IBBI has also explained the definition of 'relationship' citing different kinds. It will be deemed as in-relation if an insolvency professional derives 5% or more of his gross revenues in a year from professional services to the related party. Further, where the insolvency professional or the other professional, is a shareholder, director, key managerial personnel or partner of the related party, will also form 'relationship'.
According to a circular issued by the IBBI, the disclosures must be made in respect of ongoing resolution processes as on date and all subsequent resolution processes. IBBI said that the disclosures due on date in respect of the ongoing processes should be made to the respective insolvency professional agency by January 31, 2018.
