INSOLVENCY AND BANKRUPTCY BOARD OF INDIA (PROCEDURE FOR GOVERNING BOARD MEETINGS) REGULATIONS, 2017 – AN OVERVIEW

[Mr. M. GOVINDARAJAN]

Section 188 of Insolvency and Bankruptcy Code, 2016 (‘Code’ for short) provides for the establishment of Insolvency and Bankruptcy Board of India (‘Board’ for short).  Section 189(1) of the Code provides that the Board shall consist of the following members who shall be appointed by the Central Government, namely-

• a Chairperson;
• three members from amongst the officers of the Central Government not below the rank of Joint Secretary or equivalent, one each to represent the Ministry of Finance, the Ministry of Corporate Affairs and Ministry of Law – ex officio;
• one member to be nominated by the Reserve Bank of India, ex officio;
• five other members to be nominated by the Central Government, of whom at least three shall be the whole-time members.

Section 191 (1) of the Code provides that the Board shall meet at such times and places, and observe such rules of procedure in regard to the transaction of business at its meetings (including quorum at such meetings) as may be determined by regulations.  By virtue of this section the Board made the ‘Insolvency and Bankruptcy Board of India (Procedure for Governing Board Meeting) Regulations, 2017 (‘Regulation’ for short) vide Notification NO. IBBI/2016-17/GN/REG007, dated 30.01.2017.   These regulations came into effect from 30.01.2017.

This regulation provides for the business to be conducted by the Board, procedure for convening the meeting of the Board, keeping of minutes of meeting, charter of conduct of the members of the Board etc.,

Businesses to be transacted by the Board

Regulation 3(1) provides the businesses that are to be transacted by the Governing Board as detailed below-

• Regulations to be made under Section 240;
• Annual accounts and audit under Section 233;
• Annual budget under Section 228;
• Annual Report under Section 229;
• Delegation of powers under Section 230;
• Operation Manuals for various activities;
• Timelines for disposal of various activities;
• Expenditure above ₹ 5 crore;
• Location of office premises;
• Number and categories of employees and their compensation;
• Accommodation for Chairperson and Whole Time Members under Rule 12 of the IBBI (Salary, Allowances and other Terms and Conditions of Service of Chairperson and members), Rules, 2016;
• Any other as may be specifically required by the Governing Board from time to time;
• Any other as may be brought before the Governing Board from time to time; and
• Any other as may be required under any law for the time being in force.

The business shall be transacted, as far as possible, in the meetings of the Board.  A member may attend a meeting through video conferencing.

Resolution by circulation

Wherever considered necessary, a business may be transacted by a resolution passed by circulation of an agenda to the members.  A resolution passed through circulation of the agenda to the members shall be placed before the next meeting of the Board for ratification.

Periodicity of meetings

Regulation 4(1) provides that there shall be at least four meetings of the Board in a year and at least one meeting in each quarter.

Convening of meeting

Regulation 4(2) provides that the Chairperson or in his absence, any other member nominated by the Chairperson in this behalf, may convene the meetings of the Board.

Regulation 4(3) provides that any three members may require the Chairperson to convene a meeting of the Governing Board at any time.  The Chairperson shall convene the meeting of the Governing Board accordingly.  If the Chairperson is not available, any three members may require the Secretary to convene the meeting of the Governing Board.

Regulation 4(6) provides that the Chairperson or if he is unable to attend the meeting of the Governing Board, for any reason, any other member chosen by the members present in the meeting, shall preside over the meeting.

Place of meeting

Regulation 4(4) provides that the meetings of the Governing Board shall be held at such places in India as may be specified in the notice convening the meeting.  The meeting shall ordinarily be held in the office.  The meeting may also be held at its other offices or at any other place in India, whenever, in the opinion of the Governing Board, it is expedient to do so.

Notice of meeting

Regulation 5 provides that the notice for the meeting of the Governing Board shall be given not less than seven days.  Such notice along with agenda shall be sent to every member in advance to his usual address in India or by email as furnished by him to the Board.  If an urgent meeting of the Governing Board is required to be convened, seven days’ notice may be dispensed with by the Chairperson subject to the condition that members get sufficient notice to enable them to attend the meeting.

No business other than that for which the meeting has been convened shall be transacted at a meeting of the Governing Board, except with the permission of the Chairperson.

Quorum

Regulation 6 provides that if the Governing Board has 8 or more members the quorum shall be 5 members; if the Governing Board has less than 8 members, the quorum shall be three members for the transaction of business at a meeting.

Leave of absence

Regulation 7 provides that the Governing Board may grant leave of absence to a member not present in the meeting.  Such leave of absence shall be recorded in the minutes of the meeting.

Vote

All businesses which come up before the meeting shall be decided by a majority vote of the members present.  In case of equality of votes, the Chairperson or in his absence the member presiding shall have a second or casting vote.

Minutes of the meeting

The board shall cause the minutes of all the proceedings in the books kept for this purposes.  The minutes may be in the form of binders containing loose leaves, duly numbered.  A copy of the draft minutes of the proceeding of each meeting shall be circulated as soon as possible for confirmation by the members.  The confirmed minutes shall be signed by the Chairperson or the member presiding at the succeeding meeting and taken on record thereafter.

Duties of Secretary

The Chairperson shall nominate a senior officer of the Board as Secretary of the Board to keep the custody of common seal, register of attendance of the meetings, agenda, minutes book and other documents/records etc., pertaining to the meetings of the Board and of Committees.  The Secretary shall arrange meetings, record minutes and generally ensure that these regulations are followed.

Charter of conduct

Chapter IV of the regulations prescribed the code of conducts for the members of the Board which are detailed as below:

• Every member, who is directly or indirectly concerned or interested in any business coming up for consideration at a meeting of the Board, shall disclose the nature of his interest and such disclosures shall be recorded in the proceedings of the Board and the member shall not take part in any deliberation or decision of the Board with respect to such business;
• A member shall inform the Board if he becomes subject to any of the disqualifications specified in the Code; and in turn the Board shall inform the same to the Central Government;
• The Chairperson and every whole time member before entering upon his duties, shall taken an oath of office and secrecy in the prescribed form contained in Schedule I;
• Every member, before joining upon his duties, shall sign a charter of conduct confirming his allegiance to the highest standards of integrity as specified in the format given in Schedule II.If the members are already in office shall sign the same within two months of the regulations coming into force.The charter of conduct is as follows-

• A member shall ensure that any conflict interests to which he may be subject to does not affect any decision of the Board;
• A member shall disclose his interest which may conflict with his duties;
• A member shall not exploit to his personal advantage, any personal or professional relationship with regulated entities or any employee of such entities;
• A whole time member shall not hold any other office of profit;
• A whole time member shall not engage in any other professional activities which entails receipt of salary or professional fees;
• A member is to disclose the nature of his interest in any business coming up for consideration at a meeting of the Board;
• A member shall not take part in any deliberation or discussion with respect to such business except to the extent of professional advice if sought by theBoard;
• No member shall hear or decide any matter where he has a conflict interest;
• A member shall disclose if he or his family has any dispute in respect of product or services availed a regulatory entity;
• A whole time director shall not accept any gift by whatever name called, to the extent possible, from a regulated entity;
• If such gift exceeds ₹ 5000/- the member shall hand over the gift to the IBBI;
• A member shall disclose-

• any post, other employment or fiduciary position which a member holds, or has held in the past 5 years in connection with any regulated entity;
• any other significant relationship, including a professional, personal, financial or family relationship held in connection with a regulated entity.

Procedure for managing the conflict

Regulation 11 provides that a member shall disclose a conflict of interest at the earliest opportunity.  He shall seek determination from the Chairperson if he has a doubt where there is a conflict of interests or not.  If the Chairperson determined that there is a conflict of interests, the member or the Chairperson shall refrain from dealing with the particular matter.  The Chairperson or the Board shall assign that matter to another member or a committee of m embers.

Procedure for public to raise conflict of interests

Regulation 12 provides that any person may bring to the notice of the Secretary if he has reasonable belief that a member has an interest in a particular matter.  The Secretary shall place the details before the Chairperson in case of a member.   In case of a Chairperson he may place the details before the Board.  The Chairman or the Board shall determine if the member or the Chairperson has an interest which is likely to affect the decision by him.  The member or the Chairperson shall refrain from dealing with the particular matter.  The matter may be assigned to another member or a committee of members by the Chairperson or the Board.

Maintenance of disclosures

Regulation 13 provides that the information as disclosed shall be confidential and shall not be disclosed to others.  However the information may be provided only to the authorized person in the following circumstances-

• a requirement for disclosure for the purposes of managing potential actual conflicts; or
• any legal or regulatory obligation to disclose the information.

The disclosures are of two types – one is disclosure by the Chairperson and the other is disclosure by a member.  The disclosures by Chairperson may be scrutinized under the authority of the Governing Board with due regard to Chairperson’s responsibility.  The disclosure of a member may be scrutinized under the authority of the Chairperson with due regard to members’ areas of responsibility.

The Secretary is required to keep and maintain custody of documents and records relating to any disclosure made by members.

Contracts

Regulation 13 provides that any contract may be made in writing signed by a member, officer of the Board or any other person acting under the authority, whether expressed or implied and may in the same manner be varied or discharged.  Any document related with the contract may be signed and verified on behalf of the Board by any officer authorized by the Chairperson.  All contracts shall be valid and binding on the Board.

Common Seal

The common seal of the Board shall not be affixed to any instrument except in pursuance of a resolution of the Governing Board and in the present of at least one member who shall sign such instrument in token or the presence and such signing shall be independent of the signing of any person who may sign the instrument as the executor.

Powers of Governing Board

The following are the additional powers given to the Board by the Regulation-

• The Board for the reasons to be recorded in writing, determine the procedure in a particular case;
• The Board may relax any of these regulations in case of exigencies warranting such relaxation.

Meetings of Committees

Regulation 17 provides that the regulations shall apply mutatis mutandis to the meetings of Committees of the Governing Board.  50% of members of the existing strength of the committee shall constitute quorum for meetings of the committee.