Explore the pivotal role and essential duties of a Resolution Professional under the Insolvency and Bankruptcy Code for effective financial resolution.
The Corporate Insolvency Resolution Process (CIRP), established under the Insolvency and Bankruptcy Code, 2016 (referred to as “The Code”), is a framework designed for addressing instances where a corporate debtor, in default of payments to its creditors, undergoes an insolvency proceeding. The primary objective of the CIRP is to attempt the revival of the corporate debtor rather than opting for its liquidation or winding up as a means of repaying the creditors. The Code, along with subsequent amendments, stipulates a defined period within which the CIRP must be concluded. The commencement date of the CIRP is the date on which the adjudicating authority issues an order admitting the CIRP application. Know the complete details of Resolution Professional under IBC.
An Overview of the Resolution Professional (RP) Role under the Insolvency and Bankruptcy Code (IBC):
The Insolvency and Bankruptcy Code (IBC) in India is a comprehensive legal framework designed to address issues of insolvency and provide an efficient mechanism for the resolution of distressed businesses. At the heart of this process is the Resolution Professional (RP), a pivotal figure appointed by the National Company Law Tribunal (NCLT) to navigate the insolvency resolution journey. The role of the RP encompasses a diverse array of responsibilities and duties aimed at safeguarding the interests of creditors, maximizing the value of assets, and facilitating the revival of the debtor’s business.
Who is a Resolution Professional (RP)?
RP is a licensed and experienced insolvency professional who plays a pivotal role in the Corporate Insolvency Resolution Process (CIRP) as defined by the Insolvency and Bankruptcy Code (IBC), 2016. They are responsible for managing and overseeing the insolvency resolution process of a financially distressed company, aiming either to revive the company or to liquidate its assets in an orderly manner.
Duties of Interim Resolution Professional (IRP):
The IRP is an RP appointed on an interim basis, prior to the admission of a company into CIRP. Their key duties include:
- Preserving assets and operations: Protecting the company’s assets and ensuring business continuity.
- Verifying claims: Assessing claims from creditors and preparing a list of creditors for the CoC.
- Preparing information memorandum: Compiling a comprehensive document detailing the company’s financial status and assets for potential bidders.
- Conducting meetings: Convening meetings of creditors and the CoC.
Appointment of the Resolution Professional under IBC:
The RP is appointed by the Adjudicating Authority (National Company Law Tribunal or NCLT) either:
- Upon admission of the company into CIRP: The IRP becomes the RP unless replaced by the CoC.
- Upon recommendation of the CoC: The CoC can recommend a different RP to the Adjudicating Authority.
Essential qualities of a RP under IBC:
- Integrity and independence: To ensure unbiased decisions and maintain stakeholder trust.
- Financial expertise: To accurately assess financial health and evaluate resolution plans.
- Legal knowledge: To navigate complex insolvency laws and regulations.
- Strong communication and negotiation skills: To effectively engage with stakeholders and secure consensus.
- Problem-solving and decision-making abilities: To make timely and sound decisions under pressure.
Responsibilities and Duties of Resolution Professional:
The Insolvency and Bankruptcy Code (IBC) outlines a wide range of responsibilities and duties for the RP, including:
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Taking Control and Protecting Assets:
- Assuming control of the corporate debtor’s assets, operations, and management.
- Protecting and preserving assets from any misuse, damage, or loss.
- Maintaining accounts of the corporate debtor.
- Ensuring business continuity as a going concern.
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Assessing Financial Status:
- Conducting a thorough financial and operational assessment of the corporate debtor.
- Preparing a comprehensive report on the financial position, including assets, liabilities, and other relevant details.
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Identifying and Verifying Claims:
- Inviting claims from creditors and stakeholders within a specified time frame.
- Verifying the authenticity and validity of claims.
- Preparing a list of creditors and their claims.
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Forming the Committee of Creditors (CoC):
- Facilitating the constitution of the CoC, comprising financial creditors.
- Convening and conducting meetings of the CoC.
- Providing information and assistance to the CoC as required.
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Inviting and Evaluating Resolution Plans:
- Inviting resolution plans from prospective resolution applicants.
- Evaluating the viability and feasibility of resolution plans in consultation with the CoC.
- Submitting the resolution plan to the CoC for approval.
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Implementing the Approved Resolution Plan:
- Overseeing the implementation of the resolution plan approved by the CoC and Adjudicating Authority.
- Ensuring compliance with the terms of the approved plan.
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Liquidation (if necessary):
- If no viable resolution plan is found, initiating liquidation proceedings.
- Realizing assets in a fair and transparent manner.
- Distributing proceeds to creditors in accordance with their priority.
Limitations on the Resolution Professional:
- Restrictions on transactions: The RP is prohibited from entering into certain transactions, such as selling assets below their liquidation value or making preferential payments to certain creditors.
- Approvals from CoC: Certain actions, such as incurring expenses beyond a specified limit, require prior approval from the CoC.
- Supervision by Adjudicating Authority: The RP is subject to supervision and oversight by the NCLT to ensure adherence to regulations and protect stakeholder interests.
Conclusion:
It plays a crucial role in the insolvency resolution process, acting as a custodian of the corporate debtor’s assets and navigating the complex process of reviving or liquidating the company. Their expertise, integrity, and adherence to ethical standards are essential to ensure a fair and transparent resolution for all stakeholders. Visit us at Vakilsearch to get more information.
FAQs
Who can be a resolution professional under IBC?
As per the Insolvency and Bankruptcy Code (IBC), a person can be appointed as a resolution professional if they are enrolled as a professional member with an insolvency professional agency (IPA) and are not disqualified under the provisions of the IBC.
Who can appoint a resolution professional?
The appointment of a resolution professional is typically done by the National Company Law Tribunal (NCLT) based on the recommendations of the Committee of Creditors (CoC) during the insolvency resolution process.
Is a resolution professional a public servant?
No, a resolution professional is not considered a public servant. While they play a critical role in the insolvency resolution process and are appointed by a quasi-judicial authority (NCLT), their role is more aligned with that of a private professional overseeing the affairs of the corporate debtor.
What is the salary of a resolution professional?
The remuneration of a resolution professional is determined by the Committee of Creditors (CoC) within the limits specified by the Insolvency and Bankruptcy Board of India (IBBI). The CoC approves the fees and expenses payable to the resolution professional.
Which section deals with the replacement of a resolution professional?
The replacement of a resolution professional is covered under Section 22 of the Insolvency and Bankruptcy Code (IBC). This section outlines the circumstances under which the resolution professional may be replaced and the process for such replacement, typically involving the approval of the Committee of Creditors (CoC).
