Tag: Authorisation For Assignment

An Insolvency Professional (IP) is a registered individual, regulated by the Insolvency and Bankruptcy Board of India (IBBI), who administers the resolution or liquidation of a distressed corporate debtor under the Insolvency and Bankruptcy Code, 2016 (IBC). The IP acts as the pivot of the entire insolvency process, managing the corporate debtor’s assets, collecting information, and formulating resolution plans. They are required to be independent, impartial, and act in the best interest of all stakeholders. The IBBI registers and regulates IPs under Section 204 of the IBC, ensuring they possess the necessary qualifications, experience, and integrity. An IP is distinct from a resolution professional, as the term encompasses all professionals appointed under the Code for various roles.

Eligibility and Appointment of Insolvency Professional:

1. Eligibility of Insolvency Professional

An Insolvency Professional (IP) is a person who is authorized to conduct insolvency proceedings under the Insolvency and Bankruptcy Code, 2016 (IBC). To become an IP, a person must be enrolled with an Insolvency Professional Agency (IPA), pass the required examination, and obtain registration from the Insolvency and Bankruptcy Board of India (IBBI). The person must satisfy the eligibility conditions prescribed under the Code and regulations, including qualifications, experience, and professional standards. An IP must act independently, fairly, and professionally while performing duties such as managing the Corporate Insolvency Resolution Process (CIRP), protecting assets, and assisting in resolution.

2. Appointment of Interim Resolution Professional (IRP)

The Interim Resolution Professional (IRP) is appointed by the National Company Law Tribunal (NCLT) after admitting an application for initiating the Corporate Insolvency Resolution Process (CIRP). The appointment is made from the list of eligible insolvency professionals submitted according to the procedure prescribed under the Insolvency and Bankruptcy Code, 2016. The IRP takes control of the corporate debtor, manages its affairs, receives and verifies claims of creditors, and constitutes the Committee of Creditors (CoC). The IRP performs these duties until the appointment of the Resolution Professional.

3. Appointment of Resolution Professional (RP)

The Resolution Professional (RP) is appointed by the Committee of Creditors (CoC) after the constitution of the Committee during CIRP. The CoC may confirm the Interim Resolution Professional as the RP or replace the IRP with another eligible insolvency professional. The appointment must be approved by the National Company Law Tribunal (NCLT) as required under the Code. The RP manages the insolvency process, invites resolution plans, conducts CoC meetings, and ensures compliance with the Insolvency and Bankruptcy Code, 2016.

4. Duties After Appointment

After appointment, the Insolvency Professional performs important responsibilities under the Insolvency and Bankruptcy Code, 2016. The IP takes custody and control of the corporate debtor’s assets, preserves their value, verifies claims of creditors, maintains records, and facilitates the insolvency resolution process. The IP must act in an independent and unbiased manner while protecting the interests of all stakeholders. The professional also assists the Committee of Creditors (CoC) in evaluating resolution plans and completing the CIRP within the prescribed time.

Functions of Insolvency Professional:

1. Taking Control of Corporate Debtor

An Insolvency Professional (IP) takes control and custody of the assets and affairs of the corporate debtor after the commencement of the Corporate Insolvency Resolution Process (CIRP). The powers of the Board of Directors are suspended, and the IP manages the company’s operations as a going concern. The IP protects and preserves the value of the assets, prevents misuse of company resources, and ensures that business activities continue smoothly during the insolvency process. This function helps in maintaining the stability of the corporate debtor.

2. Verification of Claims

The IP is responsible for receiving, examining, and verifying claims submitted by creditors during the CIRP. The IP collects supporting documents, determines the validity of claims, and prepares a list of admitted creditors. This information helps in forming the Committee of Creditors (CoC) and determining voting rights. Accurate verification of claims ensures transparency, prevents false claims, and supports fair decision making under the Insolvency and Bankruptcy Code, 2016.

3. Conducting Meetings of CoC

The IP organizes and conducts meetings of the Committee of Creditors (CoC) during the insolvency resolution process. The IP prepares agendas, provides relevant information, records decisions, and assists the Committee in making informed commercial decisions. The IP ensures that meetings are conducted according to the provisions of the Insolvency and Bankruptcy Code, 2016 and applicable regulations. This function promotes transparency, proper communication, and effective supervision of CIRP.

4. Inviting and Examining Resolution Plans

The IP invites resolution plans from eligible resolution applicants and examines whether they comply with the requirements of the Insolvency and Bankruptcy Code, 2016. The IP evaluates the plans based on legal requirements and places them before the Committee of Creditors (CoC) for consideration. This function helps in identifying suitable proposals for revival of the corporate debtor and ensures that the resolution process is conducted in a fair and transparent manner.

5. Protecting and Preserving Assets

One of the important functions of an IP is to protect and preserve the assets of the corporate debtor during the insolvency process. The IP takes necessary steps to prevent loss, damage, or reduction in the value of assets. Proper management of assets improves the chances of successful resolution and maximizes recovery for creditors. This responsibility ensures that the interests of stakeholders are protected throughout the CIRP.

6. Managing Day to Day Operations

During CIRP, the IP manages the daily operations of the corporate debtor and attempts to keep the business running as a going concern. The IP coordinates with employees, suppliers, customers, and other stakeholders to maintain business continuity. This function helps preserve employment, maintain revenue generation, and improve the possibility of successful resolution. Efficient operational management increases the value of the company during insolvency proceedings.

7. Reporting to NCLT and CoC

The IP is responsible for submitting reports and updates to the National Company Law Tribunal (NCLT) and the Committee of Creditors (CoC) regarding the progress of the insolvency process. The IP provides information about claims, assets, resolution plans, and other important matters. Regular reporting ensures accountability, transparency, and compliance with the Insolvency and Bankruptcy Code, 2016 throughout the CIRP.

8. Facilitating Liquidation Process

If the corporate debtor cannot be revived and the Committee of Creditors (CoC) recommends liquidation, the IP may assist in the liquidation process as a liquidator where appointed. The IP helps in realizing assets, verifying claims, and distributing proceeds according to the priority prescribed under the Insolvency and Bankruptcy Code, 2016. This function ensures orderly closure of the company while protecting the rights of creditors and stakeholders.

Powers of Insolvency Professional:

1. Power to Take Control of Corporate Debtor

An Insolvency Professional (IP) has the power to take control and custody of the assets, records, and operations of the corporate debtor after the commencement of the Corporate Insolvency Resolution Process (CIRP). The powers of the Board of Directors are suspended, and the IP manages the affairs of the company. The IP can take necessary steps to protect assets, maintain business continuity, and preserve the value of the corporate debtor in accordance with the Insolvency and Bankruptcy Code, 2016.

2. Power to Manage Business Operations

The IP has the power to manage the day to day affairs of the corporate debtor as a going concern during CIRP. The IP may take operational decisions, coordinate with employees, suppliers, and customers, and ensure that business activities continue without disruption. This power helps maintain the value of the company and improves the possibility of successful resolution. The IP must exercise this power independently and in the best interests of stakeholders.

3. Power to Collect Information and Documents

The IP has the authority to collect financial records, books of accounts, contracts, and other relevant documents related to the corporate debtor. The IP can require information from directors, employees, creditors, and other persons connected with the company. This power enables the IP to verify claims, understand the financial position of the company, and prepare an effective resolution process under the Insolvency and Bankruptcy Code, 2016.

4. Power to Verify Claims of Creditors

The IP has the power to receive and verify claims submitted by financial creditors, operational creditors, employees, and other stakeholders. The IP examines supporting documents and determines the validity and amount of claims. After verification, the IP prepares the list of creditors and constitutes the Committee of Creditors (CoC). This power ensures that only genuine claims participate in the insolvency process and supports fair decision making.

5. Power to Constitute Committee of Creditors

The IP has the power and responsibility to constitute the Committee of Creditors (CoC) after verifying the claims of creditors. The CoC mainly consists of financial creditors and plays a key role in decision making during CIRP. The IP prepares the list of members, determines voting shares, and facilitates the meetings of the Committee. This power ensures proper representation of creditors during the insolvency resolution process.

6. Power to Invite Resolution Plans

The IP has the power to invite resolution plans from eligible resolution applicants during CIRP. The IP provides necessary information, examines the plans, and places them before the Committee of Creditors (CoC) for approval. The IP ensures that the plans comply with the requirements of the Insolvency and Bankruptcy Code, 2016. This power helps in identifying suitable proposals for revival and restructuring of the corporate debtor.

7. Power to Conduct CoC Meetings

The IP has the power to call, conduct, and manage meetings of the Committee of Creditors (CoC). The IP prepares agendas, circulates relevant information, records decisions, and ensures compliance with legal procedures. Although the IP does not have voting rights in the CoC, the IP assists members in making informed decisions. This power promotes transparency, accountability, and effective functioning of the insolvency resolution process.

8. Power to Protect Assets of Corporate Debtor

The IP has the power to take necessary measures for protecting and preserving the assets of the corporate debtor during insolvency proceedings. The IP may prevent unauthorized transfer, misuse, or reduction in asset value. Proper protection of assets ensures maximum value realization for creditors and stakeholders. This power supports the objective of the Insolvency and Bankruptcy Code, 2016 to maximize asset value and achieve effective resolution.

9. Power to Act as Liquidator

Where the corporate debtor proceeds into liquidation, an eligible IP may be appointed as a liquidator. The liquidator has powers to take control of assets, verify claims, sell property, distribute proceeds, and complete the dissolution process. The IP performs these functions according to the provisions of the Insolvency and Bankruptcy Code, 2016. This power ensures an orderly liquidation process and protects the interests of creditors and stakeholders.