The Bankruptcy Code is a unified and comprehensive piece of legislation for the resolution of insolvency in respect of companies, limited liability partnerships, partnership firms and individuals. The Code creates a new institutional framework which consists of adjudicatory bodies, a regulator, Insolvency Professionals and information utilities. With the enforcement of the Insolvency Bankruptcy Code, 2016 the Insolvency Professionals (IP’S) have to play a pivotal role in the insolvency process which will be conducted in two phases for corporates, partnership firms, LLP’s and individuals. The first phase will be of conducting the insolvency proceedings which have to be completed within 180 days from filing the application with 90 days additional if required. As per the Code, Insolvency Professional means a person enrolled with an Insolvency Professional Agency as its member and registered with the Board as an Insolvency Professional. Insolvency Professional Agency means any person registered with the Board as Insolvency Professional Agency. As defined in section 206 of the Code no person shall render his services as Insolvency Professional without being enrolled as a member of an Insolvency Professional Agency and registered with the board.
QUALIFICATION AND EXPERIENCE REQUIRED FOR IP
An individual shall be eligible for registration as IP if he:
- Has passed the National Insolvency Examination
- Has passed the Limited Insolvency Examination and has fifteen years of experience in management, after he received a Bachelor’s degree from a university established or recognized by law
- Has passed the Limited Insolvency Examination and has ten years of experience as:
(i) A chartered accountant enrolled as member of the Institute of Chartered Accountants of India
(ii) A company secretary enrolled as a member of the Institute of Company Secretaries of India
(iii) A cost accountant enrolled as a member of the Institute of Cost Accounts of India
(iv) An Advocate enrolled with a Bar Council
Individuals not entitled to be registered as Insolvency Professional:-
- Non Resident
- A person who does not have the qualification and experience specified in the regulation.
- Person who has been convicted by any competent court for an offence punishable with imprisonment for a term exceeding six months or for an offence involving moral turpitude and a period of five years has not be elapsed from the date of expiry of the sentence
- Person who has been convicted of any offence and sentenced in respect thereof to imprisonment for a period of seven years or more
- Person who is an undischarged insolvent or has applied to be adjudicated as an insolvent
- Person who has been declared to be unsound mind
- Person who is not fit and proper person
An individual enrolled with an Insolvency Professional Agency as a professional member may make an application to the Board in FORM A of the Second Schedule along with the non-refundable fee of Rupees Ten Thousand only to the Board. The Board shall acknowledge the application made by the Applicant within seven days of its receipt. The Board may require the applicant to submit additional documents, information or clarification that it deems fit or may require the applicant to appear before the Board in person or through its representative. Once the Board is satisfied after inspection or inquiry as it deems necessary that the applicant is eligible, it may grant certificate of registration to the applicant to carry on the activities of an Insolvency Professional in FORM B of the Second Schedule, within 60 days of the receipt of the application excluding the time given by the board for presenting additional documents, information or clarification or appearing in person. If after considering an application, the Board is of prima facie opinion that the registration ought not be granted, it shall communicate the reasons for forming such an opinion and give the applicant an opportunity to explain why his application should be accepted within 15 days of the receipt of the communication from the Board, to enable it to form a final opinion.
RECOGNITION OF INSOLVENCY PROFESSIONAL ENTITIES
A Limited Liability Partnership, a registered Partnership firm or a Company may be recognized as an Insolvency Professional entity when majority of partners of the Limited Liability Partnership or registered Partnership firm are registered as Insolvency Professional or a majority of the whole time director of the company are registered as Insolvency Professional. Eligible person may make an application for recognition as an Insolvency Professional entity to the Board in FORM C. If Board is satisfied after inspection or inquiry as it deems necessary that the Applicant is eligible, it may grant a Certificate of recognition as an Insolvency Professional entity in FORM D.
FUNCTIONS AND RESPONSIBILITIES OF INSOLVENCY PROFESSIONAL
In the corporate insolvency resolution process insolvency professional plays two roles one as an INTERIM RESOLUTION PROFESSIONAL (IRP) and other as RESOLUTION PROFESSIONAL (RP). IRP shall be appointed by Adjudicating Authority (NCLT) within 14 days from the insolvency commencement date. Where the application for Corporate Insolvency Resolution Process (“CIRP”) is made by the financial creditor or the corporate debtor, the RP as proposed shall be appointed as the IRP if no disciplinary proceedings are pending against him. Where an application is made by the operational creditor and no proposal for IRP is made then NCLT shall make a reference to the Board for the recommendation of an IRP. The committee of creditors may at its first meeting with a majority vote of not less than 75 % of the voting share of the financial creditor either resolve to appoint the IRP as an RP or to replace the IRP by another RP.
IRP shall perform following functions:-
- Collect all information relating to the assets, finances, and operations of the corporate debtor for determining the financial position of the corporate debtor.
- IRP shall within maximum 3 days from his appointment, shall make a public announcement and provide the last date for submission of proof of claim, which shall be 14 days from the date of appointment of IRP.
- Receive and collate all the claims submitted by creditors to him pursuant to the public announcement
- Constitute a committee of creditors
- Monitor the assets of the corporate debtor and manage its operations until a resolution professional is appointed by the committee
- File information collected with the information utility
- Take control and custody of any assets 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.
RP shall perform following functions;-
- Preserve and protect the assets of the corporate debtor and continued business operations of the corporate debtor.
- Represent and act on the behalf of the corporate debtor with third parties, exercise rights for the benefits of the corporate debtor in judicial, quasi- judicial or arbitration proceedings
- Raise interim finances subject to the approval of the committee of the creditors.
- Appoint accountants, legal or other professionals in the manner as specified
- Maintain an updated list of claims
- Convene and attend all meetings of the committee of the creditors
- Prepare the information memorandum
- Invite prospective lenders, investors and any other persons to put forward resolution plans
- Present all resolution plans at the meetings of the committee of creditors
- File application for avoidance of transactions