The Insolvency and Bankruptcy Board of India (IBBI) has set minimum compensation to be paid to professionals stitching together rescue plans for insolvent companies and proposed performance-linked incentives to help businesses recover quickly.
The bankruptcy rule maker also stipulated that these professionals should not share the fees paid to any other professional hired to prepare the rescue plan.
The move seeks to protect the financial independence of resolution professionals, who have to make sensitive decisions involving the competing interests of stakeholders and encourage speedy bankruptcy resolution, thereby boosting the economy. The performance-linked incentive for an insolvency resolution professional is based on how quickly a resolution plan is finalized and implemented and is also based on the value received above the liquidation price.
IBBI’s Insolvency Resolution Procedure for Corporate Individuals (Third Amendment) Regulations, issued on Wednesday, states that the fee for a resolution professional will be decided by the bankruptcy petitioner or the committee of creditors. The fees of such professionals appointed from October 1 should not be less than the level prescribed in the new schedule.
Accordingly, for an entity in whose case the claims admitted are: 50 crores or less, the minimum monthly fee to the resolution professional should be 1 Lac. If the accepted claim is between from 50 crores 500 crores, the minimum fee should be 2 lakh per month. The regulator has specified five such slabs of fee payment. In the highest slab, where the total claims sanctioned have been exhausted 10,000 crores, the minimum fee payable to the resolution professional is 50 million.
If the insolvency applicant or the committee of creditors so decides, resolution professionals may be paid more than the monthly payment specified by IBBI, but the reasons for the same must be recorded. IBBI said such additional payments would be made taking into account market factors such as the size of the corporate debtor and the scale of operation of the business, the area of business in which the entity operates, the level of operational economic activity of the corporate debtor and the complexity of the process. can be given.
As per the incentive scheme permitted by IBBI, if the bankruptcy is resolved in less than 165 days, the resolution professional is entitled to 1% of the amount by which the recoverable value exceeds the liquidation value. If it takes between 165 days and 270 days, the performance linked pay will be 0.75% and if it takes between 270 days to 330 days, it will be 0.5%. If insolvency resolution is delayed beyond that, there is no incentive.
Cannot exceed performance-linked incentives 50 million.
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