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TMI BlogFee and other Expenses incurred for Corporate Insolvency Resolution ProcessX X X X Extracts X X X X X X X X Extracts X X X X ..... nd services required for conducting the CIRP and or managing the operations of the corporate debtor as a going concern. 2. The relevant provisions of the Insolvency and Bankruptcy Code, 2016 (Code) and regulations made thereunder having a bearing on fee and other expenses of CIRP are at Annexure A. 3. An IP is obliged under section 208(2)(a) of the Code to take reasonable care and diligence while performing his duties, including incurring expenses. He must, therefore, ensure that not only fee payable to him is reasonable, but also other expenses incurred by him are reasonable. What is reasonable is context specific and it is not amenable to a precise definition. An illustrative list of factors considered in determination of what is reasonable is given in Annexure B. 4. Para 16 of the Code of Conduct for IPs in the Schedule to the Insolvency and Bankruptcy Board of India (Insolvency Professionals) Regulations, 2016 provides that an IP must maintain written contemporaneous records for any decision taken, the reasons for taking the decision, and the information and evidence in support of such decision. This shall be maintained so as to sufficiently enable a reasonable person to tak ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mber of the Board of Directors of the corporate debtor in relation to the CIRP; (e) any penalty imposed on the corporate debtor for non-compliance with applicable laws during the CIRP; [Reference: Section 17 (2) (e) of the Code read with circular No. IP/002/2018 dated 3rd January, 2018.] (f) any expense incurred by a member of CoC or a professional engaged by the CoC; (g) any expense incurred on travel and stay of a member of CoC; and (h) any expense incurred by the CoC directly; [Explanation: Legal opinion is required on a matter. If that matter is relevant for the CIRP, the IP shall obtain it. If the CoC requires a legal opinion in addition to or in lieu of the opinion obtained or being obtained by the IP, the expense of such opinion shall not be included in IRPC.] (i) any expense beyond the amount approved by the CoC, wherever such approval is required; and (j) any expense not related to CIRP. 9. Further, the IP is directed to disclose fee and other expenses in the relevant Form in Annexure C to the Insolvency Professional Agency of which he is a member: (a) for all concluded CIRPs by 15th July, 2018, and (b) for ongoing and subsequent CIRPs within the time as specifi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ensure that he maintains written contemporaneous records for any decision taken, the reasons for taking the decision, and the information and evidence in support of such decision. This shall be maintained so as to sufficiently enable a reasonable person to take a view on the appropriateness of his decisions and actions. 25. An Insolvency Professional must provide services for remuneration which is charged in a transparent manner, is a reasonable reflection of the work necessarily and properly undertaken and is not inconsistent with the applicable regulations. 25A. An insolvency professional shall disclose the fee payable to him, the fee payable to the insolvency professional entity, and the fee payable to professionals engaged by him to the insolvency professional agency of which he is a professional member and the agency shall publish such disclosure on its website. 26. An insolvency professional shall not accept any fees or charges other than those which are disclosed to and approved by the persons fixing his remuneration. 27. An insolvency professional shall disclose all costs towards the insolvency resolution process costs, liquidation costs, or costs of the bankruptcy pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... olution process costs. Explanation. - For the purposes of this regulation, "expenses" include the fee to be paid to the resolution professional, fee to be paid to insolvency professional entity, if any, and fee to be paid to professionals, if any, and other expenses to be incurred by the resolution professional. Disclosure of Costs. 34 A. The interim resolution professional or the resolution professional, as the case may be, shall disclose item wise insolvency resolution process costs in such manner as may be required by the Board." IV. Circulars Issued by the IBBI The circular No. IP/004/2018 dated 16th January, 2018 provides as under: "3. In view of the above, it is clarified that an insolvency professional shall render services for a fee which is a reasonable reflection of his work, raise bills / invoices in his name towards such fees, and such fees shall be paid to his bank account. Any payment of fees for the services of an insolvency professional to any person other than the insolvency professional shall not form part of the insolvency resolution process cost. 4. Similarly, any other professional appointed by an insolvency professional shall raise bills / invoices in h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r hour spent on collecting and verifying claims, and a fee based on the percentage of assets handled for running the business as a going concern. (iii) An insolvency professional should consider the following factors while determining the quantum of fee to charged: (a) value and nature of the assets dealt with, (b) time properly given by the insolvency professional and her staff in attending to the affairs of the debtor, (c) the complexity of the case, (d) exceptional responsibility falling on the insolvency professional, (e) the effectiveness with which the insolvency professional carries out her duties. Illustration: X, an insolvency professional, may choose to charge higher fee if- (a) the properties of the corporate debtor are in multiple locations all over the country (nature of property), (b) key trade suppliers are also unpaid creditors and thus hostile (complexity of the case), or (c) if the existing management is not capable which requires him to expend unusual effort to run the business as a going concern (exceptional responsibility). (iv) An insolvency professional should not increase the fee charged without the prior approval of the authority fixing his/her ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as IRP) Activity Expense Head Expense Sub-Head Amount of Expense (Rs.) Amount Ratified / Approved2 by CoC (Rs.) Running Process IRP Fee Payable to IRP Cost of Insurance for IRP Other Expenses on / for IRP (travel, stay, security, etc related to CIRP.) IPE Fee Payable for Support Services to an IPE, if any Registered Valuer Fee Payable to Valuer 1 Fee Payable to Valuer 2 Fee Payable to Valuer 3, if any Other Expenses on / for Valuers (travel, stay, other out-of-pocket expenses) Other Professionals engaged for CIRP, not for Corporate Debtor Fee Payable to Accounting and Finance Professionals Fee Payable to Audit Professionals Fee Payable to Legal Professionals Fee Payable to any other Professionals Other Expenses on / for Professionals (travel, stay, other out-of-pocket expenses related to CIRP) CoC Meetings Meeting Venue Video Conferencing Electronic Voting Any other Expenses related to CoC Other Expenses Expenses on Public Announcement Expenses on CIRP related Filings before Adjudicating Authority and Other Authorities CIRP related Litigation Running Business Essential Services Electricity Water Telecommunication Services Inform ..... X X X X Extracts X X X X X X X X Extracts X X X X
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