Dynamic role of Insolvency Professional under IBC
04 Dec 2018
The Insolvency and Bankruptcy Code (IBC), 2016 is the bankruptcy code of India which seeks to consolidate the existing framework by creating a single law for insolvency and bankruptcy.
Role of Insolvency Resolution Professional(IRP):
In order to facilitate the insolvency process the first step is to appoint IRP. Under the provisions of IBC the erstwhile management of the debtor is divested of its power and the same is then vested to an IRP for a maximum period of 30 days from the date of appointment.
Whenever an application for initiation of corporate insolvency resolution process is accepted under section 7 by financial creditor, section 8 to section 9 by operational creditor, section 10 by corporate applicant the next step is the appointment of IRP under section 16 of IBC within 14 days from the insolvency commencement date.
As per section 17 of IBC the IRP then continue the business as a going concern unless a resolution plan is drawn up. The control and custody of assets of the debtor may be taken over by the IRP.
The IRP is duty bound to monitor the assets of the debtor and claims made against it and constitute a committee of creditors.
Role which an IRP is to perform:
(1)From the date of appointment of the interim resolution professional,
a. From the date of appointment the management of the corporate debtor is vested to IRP, so the IRP has to take care the functioning of the corporate debtor in an efficient manner.
b. the officers and managers of the corporate debtor shall report to the interim resolution professional and provide access to such documents and records of the corporate debtor as may be required by the interim resolution professional, so the IRP must ensure secrecy of the information.
c. financial institutions maintaining accounts of the corporate debtor shall action the instructions of the interim resolution professional in relation to such accounts and furnish all information relating to the corporate debtor available with them to the interim resolution professional, hence the IRP is to ensure that the affairs of the company are not affected.
(2)The interim resolution professional vested with the management of the corporate debtor, shall-
a. act and execute in the name and on behalf of the corporate debtor all deeds,receipts, and other documents, if any;
b. take such actions, in the manner and subject to such restrictions, as may be specified by the Board;
c. have the authority to access the electronic records of corporate debtor from information utility having financial information of the corporate debtor;
d. have the authority to access the books of accounts, records and other relevant documents of corporate debtor available with government authorities, statutory auditors, accountants and such other persons as may be specified;
e. be responsible for complying with the requirements under any law for the time being in force on behalf of the corporate debtor.
Duties of interim resolution professional:
As per section 18 of IBC the IRP has to perform the following duties:
a. collect all information relating to the assets, finances and operations of the corporate debtor for determining the financial position of the corporate debtor,including information relating to –
i business operations for the previous two years;
ii financial and operational payments for the previous two years;
iii list of assets and liabilities as on the initiation date; and
iv such other matters as may be specified;
b. receive and collate all the claims submitted by creditors to him, pursuant to the public announcement made under sections 13 and 15;
c. Constitute a committee of creditors
d. monitor the assets of the corporate debtor and manage its operations until a resolution professional is appointed by the committee of creditors;
e. file information collected with the information utility, if necessary; and
f. take control and custody of any asset over which the corporate debtor has ownership rights as recorded in the balance sheet of the corporate debtor, or with information utility or the depository of securities or any other registry that records the ownership of assets including–
i assets over which the corporate debtor has ownership rights which may be located in a foreign country;
ii assets that may or may not be in possession of the corporate debtor;
iii tangible assets, whether movable or immovable;
iv intangible assets including intellectual property;
v securities including shares held in any subsidiary of the corporate debtor, financial instruments, insurance policies;
vi assets subject to the determination of ownership by a court or authority;
g. To perform such other duties as may be specified by the Board.
Explanation.– For the purposes of this 1 [section], the term “assets” shall not include the following, namely: -
(a)assets owned by a third party in possession of the corporate debtor held under trust or under contractual arrangements including bailment;
(b) assets of any Indian or foreign subsidiary of the corporate debtor; and
(c)such other assets as may be notified by the Central Government in consultation with any financial sector regulator.
The resolution professional shall perform his functions and duties in compliance with the code of conduct provided under section 208.
Section 208 Insolvency and Bankruptcy Code 2016: Functions and obligations of insolvency professionals
1. Where any insolvency resolution, fresh start, liquidation or bankruptcy process has been initiated, it shall be the function of an insolvency professional to take such actions as may be necessary, in the following matters, namely:
a. a fresh start order process under Chapter II of Part III;
b. individual insolvency resolution process under Chapter III of Part III
c. corporate insolvency resolution process under Chapter II of Part II.
d. individual bankruptcy process under Chapter IV of Part III;
e. liquidation of a corporate debtor firm under Chapter III of Part II.
2. 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 bye laws 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
For any query please ask to Mr. Hemant Paliwal, Managing Partner at: [email protected]
Deepak Pathak
Assistant Company Secretary
HPACS Team