Resolution Professional – Role, Responsibilities and Duties under IBC
Corporate Insolvency Resolution Process (hereinafter referred to as “CIRP”) is a system incorporated in the Insolvency and Bankruptcy Code, 2016 (hereinafter referred to as “The Code”). In this, a corporate debtor that has defaulted in making payments to its creditors undergoes an insolvency process.
The intent behind CIRP is to make an attempt at reviving the corporate debtor instead of liquidating or winding it up to reimburse the creditors. The Code, and subsequent amendments, have designated a period in which CIRP has to be concluded. CIRP commencement date is the date on which the adjudicating authority passes an order to admit the CIRP application.
Interim Resolution Professional
The adjudicating authority appoints a person on the commencement date of insolvency who will conduct the entire proceeding. This person is the Interim Resolution Professional (IRP). The IRP is responsible to conduct the proceedings of CIRP and also to ascertain the operations of the corporate debtor as a going concern.
As the term suggests, the IRP’s appointment is temporary until a Resolution Professional is appointed by the Committee of Creditors (COC).
Duties of IRP
Section 18 of the Code lays down the duties of the IRP in CIRP. The duties are as follows;
- Collate information pertaining to the operations, assets and finances of the corporate debtor to understand its financial position;
- Gather all the claims made by the creditors against the corporate debtor;
- Form the COC;
- Manage finances and govern the operations of the corporate debtor as a going concern until an RP is appointed by the COC;
- Take custody of all the assets, tangible or intangible, in the name of the corporate debtor until such process is in motion;
- Any other duties as directed by the Insolvency and Bankruptcy Board of India (IBBI).
Appointment of Resolution Professional by COC
The IRP constitutes the COC by virtue of Section 18 of the Code. The COC’s first order of business, after the commission of the committee, is to appoint the Resolution Professional. As per Section 22 of the Code, the COC holds its first meeting within 7 days of its constitution. In this meeting, the committee discusses if the IRP can be appointed as the Resolution Professional to continue to conduct the CIRP.
The committee then takes a vote and if the majority is equal to or more than sixty-six per cent, then the IRP becomes the Resolution Professional. However, the committee can also resolve to replace the IRP and appoint a difference licensed Resolution Professional to conduct the process. In this case, the committee applies to the adjudicating authority to appoint the Resolution Professional.
The adjudicating authority subsequently chooses a Resolution Professional and forwards the choice to the IBBI for its approval. If the board does not approve the Resolution Professional as selected by the adjudicating authority, then the IRP resumes its position until IBBI appoints a person. This is also applicable in the case where the IBBI does not respond to the adjudicating authority within ten days of receiving the name.
Responsibilities and Duties of Resolution Professional
The COC appoints the Resolution Professional who then conducts the CIRP. He is one of the most vital members of the entire process with several responsibilities and functions to perform;
Section 23 of the Code empowers the Resolution professional to conduct the CIRP. The Resolution Professional has to moderate all the stages of CIRP and ensure smooth and timely execution of the process. The extent of management of the operations of the corporate debtor by the Resolution Professional does not end at the culmination of the process. The Resolution Professional remains responsible for the going concern of the operations until the execution of the resolution plan.
Operations of the corporate debtor as a going concern and asset management
The Resolution Professional’s most important function is to ensure the operations of the corporate debtor as a going concern. This means that even though the corporate debtor is undergoing an insolvency process, its operations must be preserved until such process concludes. The Resolution Professional has professional freedom to ensure that the operations do not fester.
The Resolution Professional also takes control of the assets and finances of the corporate debtor. He also protects and preserves the value of such assets and ensures that they remain unfettered until a resolution plan is executed. Based on this, the Resolution Professional also prepares an information memorandum which in turn assists the resolution applicant to compile a resolution plan.
Analysis of the Resolution Plan
The IBBI has devised requirements that a resolution plan must comprise. The resolution applicants submit resolution plans to the Resolution Professional. On receiving them, the Resolution Professional examines and analyses every resolution plan. He has to ensure that the resolution plans comply will all the requirements set by the IBBI.
The adjudicating authority can reject the plan if it does not meet the requirements set by the IBBI. This could also lead to termination of the Resolution Professional. The Resolution Professional presents all the resolution plans before the COC to take a vote. The plan which is approved with a majority of minimum sixty-six per cent, is presented before the adjudicating authority.
The adjudicating authority can pass an order to liquidate the corporate debtor under several circumstances. When it does, the adjudicating authority appoints a liquidator. The first option for the liquidator is the Resolution Professional. In this case, the Resolution Professional takes the responsibilities of a liquidator and conducts the liquidation process.
The insolvency professional or a Resolution Professional is the backbone of the process. Resolution Professional is the first person appointed and the last person to be relieved. The primary role of the Resolution Professional is to ensure the revival of the corporate debtor. However, more important for the Resolution Professional is to keep the process transparent and fair.