Eligibility Criteria for Insolvency and Resolution Professionals under IBC

The Insolvency and Bankruptcy Code, 2016 (IBC) introduced a well-defined system to resolve insolvency cases efficiently and in a time-bound manner. One of the key persons responsible for ensuring the success of this process is the Insolvency Professional (IP). These professionals play a central role in managing the affairs of the corporate debtor during insolvency proceedings, safeguarding assets, and conducting the resolution process in compliance with the law.

To ensure that the process is carried out in a transparent and fair manner, the IBC and its related regulations prescribe detailed eligibility criteria for individuals who wish to become Insolvency Professionals and also for those who act as Resolution Professionals (RPs) in corporate insolvency resolution processes.

This article explains in detail the eligibility requirements, qualifications, experience, independence conditions, and other related aspects that govern the appointment of Insolvency and Resolution Professionals in India.

Who is an Insolvency Professional (IP)?

An Insolvency Professional is a person registered with the Insolvency and Bankruptcy Board of India (IBBI) under Section 207 of the IBC. The primary function of an IP is to conduct the insolvency resolution, liquidation, or bankruptcy process of a corporate debtor or individual debtor.

The IP takes control of the management of the corporate debtor during insolvency, ensures that the company continues as a going concern, collects and verifies creditor claims, and convenes meetings of the Committee of Creditors (CoC). Later, the CoC may decide to appoint a Resolution Professional (RP), who may or may not be the same person as the Interim Resolution Professional (IRP).

Thus, both IPs and RPs hold a crucial fiduciary role under the Code, and hence, their eligibility and conduct are strictly regulated.

Eligibility Criteria for Insolvency Professional

The basic eligibility requirements for an individual to become an Insolvency Professional are laid down by the IBBI (Insolvency Professionals) Regulations, 2016. An individual must meet the following general conditions:

1. Residency and Age: The applicant must be a resident of India and must have attained the age of majority (18 years or above).
2. Sound Mind and Solvency: The individual should be of sound mind and a fit and proper person to carry out insolvency work. The person should be solvent and must not have been declared insolvent at any point of time.
3. Good Character and No Criminal Conviction: The individual should not have been convicted by any competent court for an offence punishable with imprisonment of more than six months or involving moral turpitude. If such a conviction has occurred, at least five years must have passed since the completion of the sentence.
4. Qualification and Experience as Prescribed by IBBI: The person must fulfil the required educational qualifications and have the necessary practical experience as specified under the regulations (discussed below).
5. Registration with Insolvency Professional Agency (IPA): Every Insolvency Professional must be enrolled as a member of an Insolvency Professional Agency recognised by the IBBI before registration.

Qualification and Experience Requirements

The IBBI provides three routes through which a person can qualify to become an Insolvency Professional:

1. National Insolvency Examination Route: The individual can clear the National Insolvency Examination (NIE) conducted by IBBI. There are no minimum experience requirements for those who clear this exam.
2. Limited Insolvency Examination (LIE) Route – with Management Experience: The individual must have at least 15 years of experience in management after obtaining a Bachelor’s degree from a recognised university. The person must also pass the Limited Insolvency Examination (LIE) conducted by the IBBI.
3. Limited Insolvency Examination Route – for Professional Members: Alternatively, a person may qualify if they have:
   
   • 10 years of post-membership experience as a Chartered Accountant, Company Secretary, Cost Accountant, or Advocate, and
     
   • Have passed the Limited Insolvency Examination (LIE).

Once any of these routes are fulfilled, the person can apply for registration as an Insolvency Professional with the IBBI through the respective Insolvency Professional Agency (IPA).

Procedure for Registration as an Insolvency Professional

After meeting the qualification and experience requirements, the individual must follow a specific procedure to get registered:

1. Enrolment with an IPA: The individual must first become a member of an Insolvency Professional Agency (IPA) such as the ICAI IPA, ICSI IPA, or ICMAI IPA.
2. Application to IBBI: Once enrolled, the applicant must apply to the IBBI in the prescribed format along with the required documents, fees, and declarations.
3. Verification by IBBI: The IBBI will verify the applicant’s credentials, qualification, conduct, and professional integrity before granting registration.
4. Grant of Registration: After satisfaction, the IBBI issues a Certificate of Registration, allowing the person to act as an Insolvency Professional.

Eligibility Criteria for Resolution Professional (RP)

While every Resolution Professional (RP) is an Insolvency Professional, not every Insolvency Professional is automatically eligible to be appointed as an RP for a particular case.
The eligibility for acting as an RP is governed by Regulation 3 of the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016.

Independence from the Corporate Debtor

An Insolvency Professional can be appointed as a Resolution Professional for a corporate debtor only if he and his firm or entity are independent of the corporate debtor.

A person shall be considered independent if:

• (a) The person is eligible to be appointed as an Independent Director under Section 149 of the Companies Act, 2013, where the corporate debtor is a company.
• (b) The person is not a related party of the corporate debtor.
• (c) The person is not an employee, proprietor, or partner of:
  • (i) A firm of auditors, secretarial auditors, or cost auditors of the corporate debtor; or
  • (ii) A legal or consulting firm that has had transactions with the corporate debtor amounting to five per cent or more of its gross turnover in the last three financial years.

This independence requirement ensures that the RP is free from bias and conflict of interest while conducting the insolvency process.

Written Consent Requirement

When the Committee of Creditors (CoC) decides to:

• appoint the Interim Resolution Professional (IRP) as the RP, or
• replace the existing RP under Section 22 or Section 27 of the IBC,

it must obtain the written consent of the proposed RP in Form AA of Schedule I of the Regulations.

Disclosure Obligations

An IRP or RP is required to make full disclosures regarding any conflict of interest or relationship with the corporate debtor or other stakeholders at the time of appointment and also throughout their tenure.

Such disclosures must be made in accordance with the Code of Conduct prescribed by the IBBI to ensure transparency and accountability in the resolution process.

Restrictions on Acting in Conflict of Interest Situations

An Insolvency Professional or Resolution Professional who is a director or partner of an insolvency professional entity cannot act as an RP in a case where that entity or any of its other members is already representing another stakeholder in the same insolvency process.

This rule is designed to prevent dual representation and ensure that the RP’s decisions remain impartial.

Important Legal Provisions

• Section 16 of the IBC: Deals with the appointment of the Interim Resolution Professional (IRP).
• Section 22 of the IBC: Provides for the appointment of the Resolution Professional (RP) by the Committee of Creditors.
• Section 27 of the IBC: Allows replacement of the RP if required.
• Regulation 3 of the CIRP Regulations, 2016: Lays down the detailed eligibility and independence requirements.
• IBBI (Insolvency Professionals) Regulations, 2016: Prescribes qualifications, registration, and code of conduct for IPs.

Fit and Proper Person Criteria

IBBI also evaluates whether the applicant is a fit and proper person before granting registration or renewal. Factors include:

• Integrity, reputation, and character;
• Absence of criminal conviction;
• Financial soundness and solvency;
• Absence of any disciplinary proceedings or professional misconduct.

This evaluation ensures that only credible and ethical professionals are entrusted with managing insolvent entities.

Code of Conduct for Insolvency Professionals

Once registered, every Insolvency Professional must comply with the Code of Conduct under the IBBI (Insolvency Professionals) Regulations, 2016. Key principles include:

• Acting with integrity and independence.
• Exercising due diligence in decision-making.
• Avoiding conflict of interest.
• Maintaining confidentiality of information.
• Ensuring fair treatment of all stakeholders.

Violation of the Code can lead to suspension, cancellation of registration, or disciplinary action.

Importance of Eligibility Norms

The insolvency process directly affects creditors, employees, and shareholders. Therefore, ensuring that only qualified and independent professionals handle these cases protects the interests of all stakeholders.

These norms serve multiple purposes:

• Maintain transparency and fairness in the process.
• Prevent conflicts of interest.
• Uphold the credibility of the insolvency system.
• Ensure that professionals have the expertise and experience to handle complex corporate affairs.

Conclusion

The eligibility criteria for Insolvency and Resolution Professionals under the IBC are designed to maintain a high standard of professionalism, independence, and integrity in the insolvency ecosystem. The combination of educational qualifications, professional experience, and ethical requirements ensures that only competent individuals are entrusted with managing distressed companies.

The Insolvency and Bankruptcy Board of India plays a vital role in regulating and monitoring these professionals to preserve the confidence of stakeholders and uphold the purpose of the IBC — which is to ensure timely resolution, revival, and maximisation of value in the interest of the economy.