Charge fee that is ‘reasonable’, IBBI tells insolvency professionals

In a circular "Fee and Other Expenses Incurred for Corporate Insolvency Resolution Process", the authority said the fees charged and expenses incurred by the insolvency professionals should be "reasonable".

The Insolvency and Bankruptcy Board of India (IBBI) has penned down a regulation on fees payable to an insolvency professional and expenses incurred by him during the corporate insolvency resolution process (CIRP).
 
In a circular "Fee and Other Expenses Incurred for Corporate Insolvency Resolution Process", the authority said the fees charged and expenses incurred by the insolvency professionals should be "reasonable".
 
In April, the Board released a discussion paper on regulation of fee payable to insolvency professionals and other process costs under Corporate Insolvency Resolution Process and invited comments on the same.
 
The experts opine this regulation is an attempt by the board to improve compliance in terms of fees charged and expenses incurred by resolution professionals. 
 
The board, however, clarified that “what is reasonable is context specific and it is not amenable to a precise definition”.
 
The circular, dated June 12, said "An IP is obliged...to take reasonable care and diligence
while performing his duties, including incurring expenses. He must, therefore, ensure that not only fee payable to him is reasonable, but also other expenses incurred by him are reasonable."
 
Further, an IP is asked to get approval of the committee of creditors (CoC) for the fee or other expenses, wherever approval is required; and all CIRP-related fees and other expenses should be paid through banking channel.
 
As per it, an IP must maintain written contemporaneous records for any decision taken, the reasons for taking the decision, and the information and evidence in support of such decision. This shall be maintained so as to sufficiently enable a reasonable person to take a view on the appropriateness of his decisions and actions.
 
Source: IBBI, Media reports

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