In order to ensure that professionals representing bankrupt companies are adequately compensated, the Insolvency and Bankruptcy Board of India (IBBI) has prescribed minimum fee slabs for resolution professionals.

Resolution professionals(RP) are enrolled with IBBI and they are involved in the dissolution process of an insolvent individual or firm. It is the responsibility of these professionals to act on behalf of such insolvent entities.

As a result of this change, it is hoped that such professionals will be able to maintain their financial independence as they make decisions in order to address the interests of both lenders and borrowers.

“This move will ensure that no time is wasted in negotiating the fees of such professions and ensure the insolvency process is conducted in a time-bound manner,” Simran Nandwani, Resident Counsel of Cornellia Chambers says the introduction of a minimum fee structure for these professionals was long due, and the same had been observed by company law tribunals and courts.

The new rules have also paved the way to allow lenders to pay resolution professionals based on how soon a resolution plan is finalised, apart from securing the independence of the professions.

“The performance-linked incentive fees introduced by this amendment will be a motivating factor for the professionals to strive towards achieving quick resolution of insolvent firms,” said Nandwani.

Meanwhile the rules lay down that the RPs shall not share any fees or charges from any professional or support service providers who are appointed under the processes. Sometimes, other service providers help the RPs with the resolution process of insolvent firms. As the new rules have ensured a clear bifurcation is made between the fees of the insolvency professions and the fees of any other professional giving support services.

As per the new rules, when the claim admitted is ₹50 crore or less, the minimum monthly fee to the insolvency professional should be ₹1 lakh. If the admitted claim is between ₹50 crore to ₹500 crore, the minimum fee should be ₹2 lakh a month. The regulator has specified five such slabs of fee payment which are as follows:

Furthermore, the IBBI issued a circular noting that it had not been made a party to several matters pending before the Supreme Court and High Court.

The Insolvency and Bankruptcy Board of India (IBBI) has prescribed minimum fee slabs for resolution professionals representing bankrupt firms from October 1 onwards so that such professionals are adequately compensated.

Leave a Comment