Insolvency has become the major talk of the financial companies. The situation occurs due to the insufficiency of the company to return loan on time which impacts the viability of the valuable assets. It can lead to further proceedings, wherein legal action will be taken against the insolvent entity, and assets may be liquidated to pay off outstanding debt. An official liquidator is there appointed by the court to liquidate the assets and pay off the proceeds to the creditors. The Insolvency Bankruptcy Code, 2016 with the objective of time-bound insolvency and maximization of assets, has a provision for the appointment of an insolvency resolution professional referred to as ‘IRP’.
According to the provisions of the IBC, the management of the debtor is deprived of the powers and the same is vested in an IRP. The IRP then continues the business of the corporate body as a major concern until a resolution plan is drawn up. This enables the corporate body to pay back its debts. IRP then monitors assets of the debtor and claims made against it and accordingly forms the committee of creditors.
The control and custody of the assets of the debtors may be taken over by the IRP. The IBC ensures implementation of strict measures against the debtors that escape from the repayment of debts or delaying it due to invalid reasons. The IRP appointed under the provisions of the IBC shall submit to the committee of creditors all resolution plans which comply with the requirements of the IBC. The role of insolvency resolution professionals under IBC is a diverse area which covers various aspects like financial assets, remaining debts, list of investors and debtors, creditors and much more. These insolvency professionals will be required to oversee the process and run the complete Insolvency resolution procedure for corporate entities. The IBC is aimed to adapt to another opportunity for the debtors that are unable to pay their debts on time and help them to stand back on their feet again without any financial issues.
Under the IBC act 2016, it is clearly stated that only the person who is registered as insolvency professional will be allowed to provide insolvency professional services. The Insolvency and Bankruptcy Code lays huge responsibility on the shoulders of an IRP. This will help maintain the authenticity of the IRP and will reduce the chances of fraudulent cases. The professional will conduct the entire process of insolvency including the fast track process and will be paid according to the norms of the company. Mostly chartered accountants(CA) play a crucial role in the insolvency resolution domain. Professional competence and demonstration of high ethical standards are the major tasks accomplished by them. This helps them to meet the prime objective of legal procedures which are mandatory for any organization.
The demand for insolvency resolution professionals gained momentum when the government of India planned to have an eco-system in place under IBC. Once the corporates file an insolvency case with national company law tribunal, the insolvency professionals are given the whole procedure and make sure that their specific goals are met in the targeted time period. Creditors outsource the jobs to insolvency professionals to set the company’s’ rival plan or to get it liquidated in a time-bound manner, which in turn will be helpful in recovering the loans from these companies. The IBBI(insolvency and bankruptcy board) of India keep an eye on the insolvency professionals, related agencies and information utilities in context of the sanctioned provision. It enacts and enforces the rules of transactions like corporate insolvency resolution, corporate liquidation, individual insolvency resolution and individual bankruptcy.
The Board is also assigned the responsibility of framing the appropriate process to have recovery proceedings in proper place. Secondly, they are supposed to conduct regular exams for chartered accountants, cost accountants, and company secretaries to qualify as insolvency professional. Even advocates can participate in this according to the newly framed legislation. Insolvency professionals have another role of drafting and filling of application. Then comes the work of initiating the liquidation process and distribute the liquidated assets among creditors as per the law. The insolvency professionals also work to safeguard the important assets of the company and making sure that the business is done smoothly.
Determining the financial position of the corporate debtor, receiving and combining the claims submitted by creditors along with monitoring the company’s assets and it’s ongoing operations. The professionals should have a convincing power to deal with the creditors. They should be able to influence them for their resolution plan and make out the necessary changes required in the plan. It is directed by many of the financial experts that insolvency professionals should not outsource any of his duties and responsibilities under the code. He should be also responsible for any sort of non-compliance with the provisions of the applicable laws taking place due to any of the bad conduct from his side. The insolvency professionals should not require any eligibility certificate from another person. They are resolution applicants that have the authority to impose strict laws on debtors if required.
Insolvency professionals target the key areas of the financial firms that help them in clearing the major issues of the debtors and helping the firm to find the right investors. They occupy a pivotal position between the debtors or creditors on one hand and the adjudicating authority on the other hand under the watchful eyes of the agency and the board. Another important role that they are assigned is an announcement of insolvency process in English newspaper and other regional newspaper circulating near the location of the corporate office and the principal office. They also have a charge to look upon the financial creditors that the debtors owe the money. Financial creditors should be briefly acknowledged in regard to the updated policies and changing the resolution plan. The insolvency resolution professionals also decide the liquidation value which is much lesser than the market value to ensure that the assets are properly sold.
Liquidation is the process where the professionals have a keen observation. Deciding the value of the asset and bidding of the same sounds a little tricky task but with proper knowledge about the current market financial trends, they can easily handle such task without any much serious issues. Dealing with issues like insolvency and bankruptcy, the professionals will get a clear idea about the liquidized assets and its various parameters.
Insolvency is observed not only in large-sized business capitals but also in small and medium-sized business. The IRPs have to approach to the existing lenders of the company to raise more funds in order to clear the debts, to pay pending salaries to the employees and to keep the existing operations running which were put on hold. Insolvency professionals should establish a regular communication with the debtors so that they can observe their current position and be updated with any relevant information about repayment of the debts.
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