IBBI al­lows mul­ti­lat­eral fi­nan­cial en­ti­ties to take up to 15% stake in IPAs

Other reg­u­lated fi­nan­cial en­ti­ties can also pick up stake in an In­sol­vency Pro­fes­sional Agency

The Hindu Business Line - - BANKING - KR SRIVATS

In­sol­vency reg­u­la­tor IBBI has al­lowed a mul­ti­lat­eral fi­nan­cial in­sti­tu­tion to ac­quire and hold up to 15 per cent eq­uity stake in an In­sol­vency Pro­fes­sional Agency (IPA).

A sim­i­lar reg­u­la­tory dis­pen­sa­tion has also been al­lowed for other reg­u­lated en­ti­ties, such as stock ex­change, bank­ing com­pany, in­sur­ance com­pany, fi­nan­cial in­sti­tu­tion and de­pos­i­tory. These en­ti­ties, too, can now pick up to 15 per cent stake in an IPA, which is a front-level reg­u­la­tor for in­sol­vency pro­fes­sion­als.

Share­hold­ing pat­tern

Pre­scrib­ing the share­hold­ing pat­tern that would be al­lowed for IPAs, the IBBI has also spec­i­fied that the Cen­tral gov­ern­ment, State gov­ern­ment and a statu­tory reg­u­la­tor can hold up to 100 per cent eq­uity in an IPA.

Other than these spec­i­fied en­ti­ties, no other per­son – ei­ther in­di­vid­u­ally or to­gether with per­sons act­ing in con­cert – will be al­lowed to ac­quire or hold more than 5 per cent stake in an IPA, said IBBI.

“We are now al­low­ing mul­ti­lat­eral fi­nan­cial in­sti­tu­tions and reg­u­lated en­ti­ties in the fi­nan­cial sec­tor to own up to 15 per cent stake in an IPA. The idea is to en­able wide­spread con­trol over IPAs,” MS Sa­hoo, Chair­man, IBBI, told Busi­nessLine.

IPAs have the re­spon­si­bil­ity to de­velop and reg­u­late the pro­fes­sion of in­sol­vency pro­fes­sion­als (IPs). They carry out quasi-leg­isla­tive, ex­ec­u­tive and quasi-ju­di­cial func­tions. MS Sa­hoo, Chair­man, IBBI

To en­able IPAs to dis­charge re­spon­si­bil­i­ties ef­fec­tively, the IBBI has also laid out the or­gan­i­sa­tional struc­ture and board com­po­si­tion for them, and made it manda­tory to have a man­ag­ing di­rec­tor in their gov­ern­ing board.

Till date, there are only three IPAs reg­is­tered with the in­sol­vency reg­u­la­tor. These are the In­dian In­sti­tute of In­sol­vency Pro­fes­sion­als of ICAI (IIIPI); the ICSI In­sti­tute of In­sol­vency Pro­fes­sion­als; and the In­sol­vency Pro­fes­sional Agency of ICAI.

These IPAs are not-for-profit com­pa­nies reg­is­tered un­der Sec­tion 8 of the Com­pa­nies Act 2013, and have been pro­moted by the three pro­fes­sional in­sti­tutes – the In­sti­tute of Char­tered Ac­coun­tants of In­dia; In­sti­tute of Com­pany Sec­re­taries of In­dia; and the In­sti­tute of Cost Ac­coun­tants of In­dia.

Sa­hoo said that all the three in­sti­tutes pro­moted IPAs al­ready com­ply with the new share­hold­ing norm as they are whol­ly­owned by a statu­tory reg­u­la­tor.

He also said that the idea of al­low­ing ‘for profit’ com­pa­nies to be­come IPAs – as pro­posed in the dis­cus­sion pa­per in Au­gust 2018 – has not been ac­cepted. “All IPAs will have to be not-for-profit com­pa­nies, and this is re­flected in the lat­est amend­ments, too,” he said.

Su­nil Pant, Chief Ex­ec­u­tive Of­fi­cer of IIIPI, told Busi­nessLine that there does not seem to be any “im­per­a­tive need” now for IIIPI to bring on board new share­hold­ers.

In­crease in IPAs

He felt that the lat­est reg­u­la­tory change to pro­vide for share­hold­ing pat­tern and al­low­ing reg­u­lated fi­nan­cial en­ti­ties to be­come share­hold­ers should be seen as an ef­fort to in­crease the num­ber of IPAs in the econ­omy.

It may be re­called that the IBBI had, in its dis­cus­sion pa­per of Au­gust 2018 on ‘Gov­er­nance of IPAs and In­for­ma­tion Util­i­ties’, noted with con­cern that no new IPA has been reg­is­tered since Novem­ber 2018.

There also seems to be no vis­i­ble sign of com­pe­ti­tion among the ex­ist­ing IPAs, the IBBI pa­per said.

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