This paper deals with the issue of fee of an insolvency professional (IP) acting as an interim resolution professional (IRP)/ resolution professional (RP) in the corporate insolvency resolution process (CIRP) who has a significant role in ensuring the timely completion of the CIRP in addition to the indispensable role played by each stakeholder including the Adjudicating Authority (AA), the committee of creditors (CoC), resolution applicants, etc. To this end, the paper suggests changes to the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016 (CIRP Regulations).
The gist of the proposed changes is as under:
1. #Fixed Fee Structure
Minimum per month fees payable to the IP are dependent upon the quantum of claims admitted as per the table below.
For example:
a) In case, the claims admitted is less than or equal to Rs. 50 crore, then the minimum per month fees payable to the IP will be Rs. 1.50 Lakh and
b) In case, the claims admitted is more than Rs. 10,000 Crore, then the minimum per month fees payable to the IP will be Rs. 7.50 Lakh.
2. #Performance-linked fee structure for timely resolution
The resolution professional may be paid performance-linked fee for ensuring timely completion of the corporate insolvency resolution process as per the table below:
Note A: It will cover the period from the commencement of the corporate insolvency resolution process and appointment of an interim resolution professional under section 16(1) of the Code till the submission of resolution plan approved by the committee to the Adjudicating Authority under regulation 39(4).
Note B: The above fee is subject to a maximum amount not exceeding Rs.5 crore, and actual payment is to be made only upon approval of the resolution plan by AA [u/s 31(1) of the Code.
3. #Performance-linked fee structure relating to Value Maximization
The resolution professional may be paid performance linked fee calculated at the rate of 1% of the positive difference between the actual realisable value and fair value subject to a maximum amount not exceeding Rs.5 crore, for ensuring value maximisation of the assets of the corporate debtor. The committee may devise any other incentive structure, or it may decide not to give such an incentive.
4. #Escrow Account Mechanism
IP shall in the first meeting of CoC give estimate of fixed fee and expenditure on hiring of other professionals / support service etc. to the CoC. For the said estimate of fees and expenses pertaining to the first six months period, CoC shall either contribute to an escrow account or obtain the interim finance, towards the same.
