With the emergence of the Insolvency and Bankruptcy Code 2016, the process of restructuring and debt resolving has immensely outstripped the preceding methodology which was disintegrated around several legislations. However, having a person appointed who would do the task surrounding the Code is very important, despite the streamlined procedure that the newly revised Code established. This is where an Insolvency Professional (IP) can help in this situation. An IP essentially acts as a mediator between the lender and the creditors with the main goal of assisting the debtor in becoming debt-free, which occurs when the creditors are assisted in getting their outstanding debts paid.
What are the functions of an Insolvency Professional?
An Insolvency Professional has n-number of functions when he is appointed as a Resolution Professional or Liquidator for various situations. A consolidated list of such matters are provided under s.208(1), a list of the various matters where the assistance of an IP is required is provided. Some of them include – Fresh Start Order Process, Pre-Packaged Insolvency Resolution Process (PPIRP), Corporate Insolvency Resolution Process (CIRP), etc. In CIRP for example, an IP has a wide range of work expected out of him.
When a court appoints an insolvency professional to handle a debt situation expressly for a corporate entity, that corporate entity’s administration is immediately transferred to the insolvency professional. This implies that the current owners and management of a firm that is unable to pay its creditors lose control over the aforementioned corporate entity. As a result, the business entity will be managed by an insolvency professional, who in this case is unbiased and free from any conflicts of interest.
The management of the affairs of the Corporate Debtor (CD) is transferred to the Insolvency Professional (IP) as soon as one is appointed, shielding it from the influence of the prior management, which consisted of the owners and the Board of Directors. The IP’s duties during this time would be to gather all data pertaining to the CD’s financial situation, compile all creditor claims, assemble a committee of creditors, and oversee CD operations. The catch with this is that the IP’s authority is not unrestricted; rather, it is subject to the judgment of the corporate entity’s lenders. When deciding how the corporate body will conduct its business, the IP and the lenders must collaborate. A very significant task is also being considered in the meantime, and a plan is being made to show the company’s facts and statistics to possible investors in order to maximise value for the lenders. The objective is to market the business for the maximum value conceivable so that the lenders can use the money to pay down the debtors’ outstanding balances couponscatch, .
Besides such functions, an Insolvency Professional is also required to under s.208(2) a code of conduct is stipulated, which an IP is required to abide by, which states –
Every insolvency professional shall abide by the following code of conduct: –
(a) To take reasonable care and diligence while performing his duties;
(b) To comply with all requirements and terms and conditions specified in the byelaws of the insolvency professional agency of which he is a member;
(c) To allow the insolvency professional agency to inspect his records;
(d) To submit a copy of the records of every proceeding before the Adjudicating Authority to the Board as well as to the insolvency professional agency of which he is a member; and
(e) To perform his functions in such manner and subject to such conditions as may be specified.”
How does one become an Insolvency Professional?
The Insolvency And Bankruptcy Board Of India (Insolvency Professionals) Regulations, 2016, provide a comprehensive set of requirements for becoming a licenced insolvency professional. Some of the fundamental requirements for eligibility include being a resident in India, not being a minor, being financially stable, being of sound mind, and not having any prior convictions for crimes carrying sentences of imprisonment longer than six months.
According to the qualifications/experience requirements, professionals with 10 years of experience, such as chartered accountants, attorneys, company secretaries, or cost accountants, must enrol as professional members with an insolvency professional agency (IPA) within a year of passing the Limited Insolvency Examination. Then, after clearing the IPA’s pre-registration educational course, they must submit an application to the Board for registration (IP). For young professionals with little experience, they must pass the Graduate Insolvency Programme before proceeding with the steps outlined by the professionals described above.
IPs thus play a crucial role in IBC processes and therefore, it also contributes for the nation’s economy to improve by ensuring that ultimately lenders feel confident in granting loans to businesses for economic growth and prosperity.
Maria is the creative writer of cre8iveline. cre8iveline is a Dubai based Logo Design Dubai and branding agency that has been in business since 2009.