IBBI Looks into Complaints About Firms Acting as Insolvency Pros
Board acts after an independent insolvency resolution professional alleged that cos were breaking rules
Dheeraj Tiwari & Sachin Dave
New Delhi | Mumbai: The Insolvency and Bankruptcy Board of India (IBBI) is looking into complaints of banks appointing professional services firms as Insolvency Resolution Professionals (IRPs).
According to an official aware of the developments, an independent IRP has written a letter to IBBI alleging that the firms are breaking the rules.
The law does not allow professional entities to be enrolled as member of an Insolvency Professional Agency registered as Insolvency Professional with the IBBI. They cannot act as IPs under the Code.
The complainant has alleged that invoices were raised by firms and not insolvency professionals, who in most cases are employees of the firms, said the above quoted official.
There are about 800 individuals who are now IRPs. Most banks, however, stay away from appointing individuals with no firm to back them as IRPs.
“The letter also states that there could be conflict of interest as some of the firms may have worked with these companies,” he added.
At present Ernst & Young, PwC, Deloitte, KPMG, Grant Thornton (GT), BDO and Alvarez and Marsal (A&M) are appointed or are in the process of being appointed in 12 insolvency cases under process. ET reached out to all the seven firms and some of the prominent senior partners heading the turnaround practice. IBBI chairman MS Sahoo said the law is clear that only an individual can be registered as insolvency professional. “There is a provision in the law on the issue of conflict of interest as well, if somebody is violating the law and if it is brought to our notice we will take action,” said Sahoo, refusing to divulge any further details.
A detailed questionnaire sent to EY, PwC, GT and A&M did not elicit any response.
A senior executive with Deloitte India said in several situations the firm has walked away from work where their internal risk advisory teams opined that there could be a conflict of interest.
“We take the conflict of interest situations very seriously and we adhere to the rules completely,” he added.
“Invoices are raised by individual IPs in our case and not the firm. Going ahead we have registered a separate entity with IBBI and only this entity will raise the invoices from the banks,” said a senior executive with BDO India.
“There’s no case against the firm and we have no further comments,” said KPMG.
“There is no conflict of interest for us. We have never worked or received work either from any of the companies we are or could be working going ahead,” a senior official at Alvarez and Marsal said.
According to a partner with one of the big 4 firms heading the turnaround practice no rule is being broken. “We have deputed a full time partner who will now help a company turnaround. There is no rule which says invoice cannot be raised by the firm,” the partner said, adding full disclosure was made to the lenders that help from my firm would be sought for operational and financial turnaround.
Another senior executive, however, agreed that there could be conflict for few firms.
“If any firm has in the past ever taken a single penny as fee from the same company that is now trying turn around, there is conflict of interest,” he said. Another partner heading the turnaround practice said, “You have to understand that the size of some of the firms is so huge that it’s possible that some work somewhere may have been done. The important question is, whether banks know about this.”