BANKRUPTCIES OFFER NEW OPPORTUNITY FOR CONSULTANTS

NEW DELHI: Several consulting firms and insolvency professionals are exploring plans to set up units that specialise in running bankrupt businesses after the Insolvency and Bankruptcy Board of India (IBBI) proposed changes to allow entities to run insolvent companies, industry executives said.

The changes will allow incorporated entities to be hired by lenders to run businesses admitted for bankruptcy resolution in place of individual professionals. The move will see specialised firms emerging in this area, with consulting firms and insolvency professionals forming consortiums to run bankrupt firms, industry executives said.

Currently, individuals are hired to administer bankrupt businesses and guide them through restructuring by inducting new investors. The IBBI had earlier specified that IPEs could be set up, but they can only render services to the individual resolution professionals hired to run bankrupt businesses and cannot themselves be appointed to administer them. This is now set to change with this proposal.

“From the perspective of professionalism, ethics and depth of knowledge, IPEs have an edge over individual resolution professionals. Some large consultancy firms have set up IPEs. One benefit of professional services and consultancy firms getting into this area is that the IPEs set up by them will be bound by the governance standards of their affiliate or parent entity. Allowing IPEs to be hired as resolution professionals is a step in the right direction,” said Anoop Rawat, a partner (insolvency and bankruptcy) at law firm Shardul Amarchand Mangaldas and Co.