Section 205 of the Insolvency and Bankruptcy Code, 2016: Insolvency Professional Agencies to Make Bye-Laws
Section 205 requires every insolvency professional agency to make bye-laws, after obtaining approval of the Insolvency and Bankruptcy Board of India, that are consistent with the model bye-laws specified by the Board under Section 196(2) of the Code.
Section 205 - Statutory Provision
Subject to the provisions of this Code and any rules or regulations made thereunder and after obtaining the approval of the Board, every insolvency professional agency shall make bye-laws consistent with the model bye-laws specified by the Board under sub-section (2) of section 196.
Meaning and Scope of Section 205
Section 205 establishes the legal foundation for the bye-laws of insolvency professional agencies. These bye-laws operate within a statutory hierarchy: they must remain subject to the Code, the rules and regulations made under it, receive approval from IBBI, and remain consistent with the model bye-laws specified by the Board.
Approval of IBBI Is Required
An insolvency professional agency cannot treat its bye-laws as purely internal rules. Section 205 expressly requires approval of the Board. This provides regulatory oversight over the rules governing membership, professional standards, monitoring, grievance redressal and disciplinary processes of an agency.
Consistency with Model Bye-Laws
The agency's bye-laws must be consistent with the model bye-laws specified by IBBI under Section 196(2). The model bye-laws provide a common regulatory framework while allowing the agency to operate through its own approved bye-laws.
Section 196(2) - Model Bye-Laws
Section 196(2) empowers IBBI to make model bye-laws to be adopted by insolvency professional agencies. The matters that may be covered include minimum standards of professional competence, professional and ethical conduct, non-discriminatory enrolment requirements, membership fees, governing board structure, monitoring of members, grievance redressal, disciplinary proceedings, penalties, fair and transparent functioning, and other matters specified under the Code.
Section 205 Requirements at a Glance
| Requirement | Legal Effect |
|---|---|
| Subject to the Code | Bye-laws cannot override or conflict with provisions of the Insolvency and Bankruptcy Code, 2016. |
| Subject to rules and regulations | Bye-laws must comply with subordinate legislation made under the Code. |
| IBBI approval | The insolvency professional agency must obtain approval of the Board. |
| Consistency with model bye-laws | The agency's bye-laws must remain consistent with model bye-laws specified under Section 196(2). |
Current Regulatory Framework
The Insolvency and Bankruptcy Board of India (Model Bye-Laws and Governing Board of Insolvency Professional Agencies) Regulations, 2016 provide the principal regulatory framework relevant to Section 205. IBBI lists the consolidated regulations as amended up to 13 May 2026.
IBBI notified the Insolvency and Bankruptcy Board of India (Model Bye-Laws and Governing Board of Insolvency Professional Agencies) (Amendment) Regulations, 2026 on 13 May 2026. Those amendment regulations were made in exercise of powers under Sections 196, 203 and 205 read with Section 240 of the Code and came into force on publication in the Official Gazette.
Relationship with Section 204
Section 204 specifies the statutory functions of insolvency professional agencies, including granting membership, laying down standards of professional conduct, monitoring members, safeguarding member interests, suspending or cancelling membership, redressing grievances and publishing information. The bye-laws required by Section 205 provide an important operational framework for performing these functions.
Related IBC Provisions
Section 196: Powers and functions of IBBI, including power to make model bye-laws under sub-section (2).
Section 201: Registration of insolvency professional agencies.
Section 203: Governing Board of an insolvency professional agency.
Section 204: Functions of insolvency professional agencies.
Section 206: Enrolled and registered persons to act as insolvency professionals.
Section 240: Power of the Board to make regulations.
Official Legal Resources
India Code - Central Acts and Legislation
IBBI - Insolvency and Bankruptcy Code and Amendment Acts