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Informist, Monday, Nov. 17, 2025

 

NEW DELHI – The Insolvency and Bankruptcy Board of India on Monday suggested that anyone appointed as a director or partner of an insolvency professional entity shall hold at least 5% of its paid-up equity share capital, provided the entity has more than 20 members. The minimum prescribed shareholding or the capital contribution of members, as the case may be, should be reduced on a pro rata basis, the board said in a discussion paper on empowering directors and partners in an insolvency professional entity by proposing minimum shareholding and capital contribution requirements. The Board has invited comments on its proposal by Dec. 7. 

 

An insolvency professional entity is a firm, partnership, or company recognised by the Insolvency and Bankruptcy Board of India as eligible to act as an insolvency professional under the Insolvency and Bankruptcy Code, 2016. The professionals under these entities are appointed as resolution professionals and liquidators of a company undergoing a corporate insolvency resolution process.

 

The insolvency profession is a fiduciary and public-interest profession, entrusted with responsibilities that directly affect creditors, debtors, and the integrity of the insolvency resolution process, the paper said. Accordingly, the institutional forms through which insolvency professionals operate, such as insolvency professional entities, must embody the principles of professional independence, equitable governance, and accountability, the paper said.

 

The step will promote fair participation, accountability, and balanced ownership across insolvency professional entities, the board said. A balanced ownership in the organisation would ensure that insolvency professional entities remain inclusive and professionally oriented, the board said. The prescription of standardised financial participation norms across insolvency professional entities would enable the bankruptcy board to better monitor insolvency professional entities from a governance and compliance perspective, the paper added

 

Highlighting the issues in the current setup, the board said that a few insolvency professionals or investor-partners often hold or contribute a significantly larger proportion of equity or capital, thereby exercising disproportionate control over the management and decision-making of the insolvency professional entity. "... members holding 95% or more shareholding/capital contribution in the IPE (insolvency professional entities) are holding around 30% of the assignments in individual capacity. This significant imbalance in workload of an IPE (insolvency professional entity) as IP (insolvency professional) and in the individual capacity underscores their critical role in driving operational success, and their minimal ownership dilutes alignment with the IPE's long-term interests and decision-making," the paper said.  End 

 

Reported by Surya Tripathi

Edited by Saji George Titus

 

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