Before the comments meant off the insolvency and bankruptcy code, 2016, protecting the interest of small investors and banks used to be unimaginably cumbersome. This code revolves around debt recovery. Section 5 of the Insolvency and bankruptcy code defines “Resolution Professional” as an insolvency professional appointed to conduct the corporate Insolvency resolution process. The word interim here conveys that this person is appointed for a short term. Let’s first understand the Insolvency resolution process. For the purpose of this article any provision mentioned herein are of the insolvency and bankruptcy code.
Insolvency Resolution Process:
Insolvency is the inability of an entity, in this case a company, to pay back its debts. This situation arises when the liabilities of the company is more than its assets. Insolvency and Bankruptcy are often confused. Bankruptcy is when there is a court decree that directs a company or any entity in question, to sell off its assets and pay the creditors. Insolvency is a situation whereas bankruptcy is a process.
Insolvency Resolution is a process by which the unpaid debts which the company does not have the faculty to pay are met. When a company faces such a crisis, the Insolvency and Bankruptcy code prescribes that an application of insolvency be filed before the adjudicating authority. Under the code, the adjudicating authority is the National Company Law tribunal (S.5 (1)). This application can be filed by a financial creditor (S.5 (7)), operating creditor (S.5 (20)) or the corporate debtor themselves (S.3 (5)). These applications should strictly be submitted in the prescribed manner under the relevant sections. When the application is accepted by the tribunal, the insolvency process commences. Within 14 days of such commencement, the National Company Law tribunal should appoint an Interim Resolution Professional to carry out the whole resolution process.
Interim Resolution Professional:
A professional appointed for a short term to carry out an assigned Insolvency Resolution process is called an Interim Resolution professional. When a financial creditor or a corporate debtor makes an application for Insolvency Resolution, under section 7 and 10 of the code respectively, there will be a recommendation for an interim professional in that. The National Company Law Tribunal has to check whether the recommended person is qualified to be a Resolution Professional and appoints him or rejects the application based on the decision. When the application is made by an operating creditor and there is no recommendation for an Interim Resolution professional, the Nation Company Law tribunal refers to the Insolvency and Bankruptcy Board of India. The board will make the required recommendation within 10 days of receipt of such reference.
Qualifications of an Interim Resolution Professional:
The eligibility to become an interim resolution professional is,
- To be an Indian resident.
- To be a major (attainment of 18 years of age).
- To be mentally sound.
- To not have been declared insolvent anytime in the past.
- To not have been convicted of any offense for which the punishment exceeds an imprisonment term of six months.
- To not have been convicted of any offense that is derogatory to his/her morality (provided that five years has not been passed since the conviction).
The Insolvency and Bankruptcy Board of India prescribes the qualifications to become a resolution professional provided that they meet the eligibility criteria. It is as follows,
- They should have cleared the National Insolvency examination or,
- They should have cleared the Limited Insolvency examination provided that they have a 15 year experience in management after graduating from a recognized university or,
Have a 10 year experience as a
1. Chartered accountant
2. Company secretary
3. Cost accountant
Insolvency professional agency:
An insolvency professional is a person who is registered with an insolvency professional agency as its member. A resolution professional is but an insolvency professional appointed to carry out the insolvency resolution process. Hence it is important to understand what this agency is. Every person who wishes to be insolvency professional should be a member of an insolvency professional agency. The main functions of this agency under section 204 is to
- Grant membership to the professional after verifying their compliance with the byelaws and payment of membership fee.
- Frame standards of professional conduct.
- Overlooking the performance of its members.
- Acting as a supportive body for the professionals and safeguard their interests regarding their rights, privileges.
- Cancelling the membership any professional when sufficient grounds are
- Redressing the grievances caused by the member professionals to their customers.
- Publishing information about its functions and members as prescribed by the regulations.
Duties of an insolvency resolution professional (s.18)
1. In order to determine the financial position of the corporate debtors, the interim resolution professional would have to collect all the information about the assets, liabilities and operations of the company, which includes business operations, financial and operational payment of the past two years.
2. Receive and collate all the claims made by the creditors to him which was an entailment of the public announcement made under sections 13 and 15.
3. Constitute a committee of creditors.
4. Monitor the assets and manage the company’s operations until an insolvency professional is appointed by the creditor committee.
5. Filing of the collected information, if necessary.
6. Take control over all assets that the corporate debtor has ownership rights on. This includes his assets that are in a foreign country, tangible or intangible, securities.
The fact that the qualifications of becoming an interim resolution professional does not include experience of having worked as one in the past, is highly criticized. So many things are at stake when one takes up this duty. Apart from this the appointment of an Interim Resolution Professional has made things much easier for the insolvent entity.
Edited by Pragash Boopal
Approved & Published – Sakshi Raje