Recent changes surrounding resolution professionals: IBBI
The issue of Resolution Professional’s fees has been a matter of debate and negotiation for quite some time now in the country.
Watch Avani Shukla sharing insights on the two key changes in the regulations around fees charged by resolution professionals (RPs). The two key changes are-
– IBBI has stipulated that RPs cannot accept or share any fees with the other professionals and other support services providers appointed under the corporate insolvency resolution process/Liquidation process.
– Introduction of a minimum fixed fee structure per month that would be linked to the number of claims admitted.
Watch now to learn more!
In this video
The issue of Resolution professional’s fees has been a matter of debate and negotiation for quite some time now in the country.
Insolvency regulator- Insolvency and Bankruptcy Board of India has brought in two key changes in the regulations around fees charged by resolution professionals (RPs).
Let us understand these changes one by one –
– It has stipulated that Resolution professionals cannot accept or share any fees with the other professionals and other support services providers appointed under the corporate insolvency resolution process or liquidation process.
– The other change is the introduction of a minimum fixed fee (per month) structure. This fixed fee will be linked to the amount of claims admitted per month. The minimum fixed fee per month ranges from ₹1-5 lakhs depending on the quantum of claims admitted.
– This fixed fee can be increased by the Committee of Creditors (CoC) depending on the cases. The reasons for the increase should be recorded in writing.
Now let’s talk about-
Performance linked incentive fee for value maximisation
A concept of performance linked incentive fee has been introduced for timely resolution, with a cap of ₹ 5 crore.
A performance linked incentive fee for value maximisation to be paid to the resolution professionals is now allowed by Insolvency and Bankruptcy Board of India at the rate of one per cent of the amount by which the “realisable value” is higher than the liquidation value.
Now for all those who don’t know what is realisable value let’s understand what it is- The net realisable value is the value of an asset that is sold, after subtracting all the costs connected to the sale.
This performance linked incentive fee for value maximisation would be available after the approval of the resolution plan by the Adjudicating Authority.
Fixed fees and performance linked success fees will further encourage the resolution professionals to complete the resolution process in time. This will help in dealing with unreasonable delays which happens in corporate insolvency resolution process quite often.
There have been some instances when NCLTs had to intervene to settle the fee of insolvency professionals during the whole process.
This is a welcome move which will help in ensuring transparency in the payment. It will also help save the time and reduce burdened with the issue of fixing the remuneration.