Know all about Interim Resolution Professional under IBC

Article explains about Eligibility of Insolvency Professional, Appointment of Interim Resolution Professional, Tenure of Interim Resolution Professional and Management of affairs and Business of the corporate debtor after appointment of Interim Resolution Professional under IBC.

Eligibility for Insolvency Professionals:- [Regulation -4 of IBBI (Insolvency Professional Regulations, 2016]

No individual shall be eligible to be registered as insolvency professional if he-;

• is a minor
• is not a person resident in India;
• does not have the qualification and experience specified in Regulation 5 of IBBI(Insolvency Professional Regulations), 2016 or
• Regulation 9 of IBBI(Insolvency Professional Regulations), 2016 as the case may be;
• 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 elapsed from the date of expiry of the sentence: However if a person has been convicted of any offence and sentenced in respect thereof to imprisonment for a period of seven years or more, he shall not be eligible to be registered;
• he is an undischarged insolvent, or has applied to be adjudicated as an insolvent;
• he has been declared to be of unsound mind; or
• he is not a fit and proper person;

Explanation: For determining whether an individual is fit and proper under these Regulations, the Board may take account of any consideration as it deems fit, including but not limited to the following criteria-

(i) Integrity, reputation and character,

(ii) Absence of convictions and restraint orders, and

(iii) Competence, including financial solvency and net worth.

So, the individual meeting aforesaid requirements and other provisions of the code can be registered with IBBI for Insolvency professional and Registered Insolvency Professional can be appointed as Interim Resolution Processional.

The insolvency and bankruptcy code 2016 have a provision to appoint an interim resolution professional.

Appointment of Interim Resolution Professional:-

A. Application for corporate insolvency resolution process is made by the financial Creditors u/s -7 or Corporate Debtor u/s 10 as the case may be –

the resolution professional, as proposed respectively in the application under section 7 or section 10, shall be appointed as the interim resolution professional, if no disciplinary proceedings are pending against him. [Sectoion-16(2) of IBC]

B. Application for corporate insolvency resolution process is made by an operational creditor and-

• No proposal for an interim resolution professional is made, the Adjudicating Authority [NCLT] shall make a reference to the Board [IBBI] for the recommendation of an insolvency professional who may act as an interim resolution professional; [Sectoion-16(3) (a) of IBC]

• A proposal for an interim resolution professional is made under sub-section (4) of section 9 of the Insolvency and bankruptcy Code, 2016 , the resolution professional as proposed, shall be appointed as the interim resolution professional, if no disciplinary proceedings are pending against him. [Sectoion-16(3) (b) of IBC]

Section 16(1) of the Insolvency and Bankruptcy Code, 2016 requires Adjudicating Authority to appoint an interim resolution professional (IRP) within fourteen days from the insolvency commencement date. As the name suggests Interim resolution professional is appointed for a very short period not exceeding 30 days from the date of his appointment.

The Board shall, within ten days of the receipt of a reference from the Adjudicating Authority under sub-section (3) of section 16, recommend the name of an insolvency professional to the Adjudicating Authority against whom no disciplinary proceedings are pending. [Sectoion-16(3)]

Tenure of Interim Resolution Professional:

The term of the interim resolution professional shall continue till the date of appointment of the resolution professional under section 22. [Sectoion-16(5)]

Management of affairs of corporate debtor by interim resolution professional. [Section -17 of IBC, 2016]

A. From the date of appointment of the interim resolution professional, – [Section-17(1)]

• the management of the affairs of the corporate debtor shall vest in the interim resolution professional;

• the powers of the board of directors or the partners of the corporate debtor, as the case may be, shall stand suspended and be exercised by the interim resolution professional;

• the officers and managers of the corporate debtor shall report to the interim resolution professional and provide access to such documents and records of the corporate debtor as may be required by the interim resolution professional;

• the financial institutions maintaining accounts of the corporate debtor shall act on the instructions of the interim resolution professional in relation to such accounts and furnish all information relating to the corporate debtor available with them to the interim resolution professional.

B. The interim resolution professional vested with the management of the corporate debtor, shall- [Section-17(2)]

• act and execute in the name and on behalf of the corporate debtor all deeds, receipts, and other documents, if any;

• take such actions, in the manner and subject to such restrictions, as may be specified by the Board;

• have the authority to access the electronic records of corporate debtor from information utility having financial information of the corporate debtor;

• have the authority to access the books of accounts, records and other relevant documents of corporate debtor available with government authorities, statutory auditors, accountants and such other persons as may be specified; and

• be responsible for complying with the requirements under any law for the time being in force on behalf of the corporate debtor.

Duties of interim resolution professional. [Section-18 of IBC, 2016]

The interim resolution professional shall perform the following duties, namely: –

• collect all information relating to the assets, finances and operations of the corporate debtor for determining the financial position of the corporate debtor, including information relating to

(i) business operations for the previous two years;

(ii) financial and operational payments for the previous two years;

(iii) list of assets and liabilities as on the initiation date; and

(iv) such other matters as may be specified;

• receive and collate all the claims submitted by creditors to him, pursuant to the public announcement made under sections 13 and 15;

• 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 of creditors;

• file information collected with the information utility, if necessary; and

• take control and custody of any asset 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 including –

(i) assets over which the corporate debtor has ownership rights which may be located in a foreign country;

(ii) assets that may or may not be in possession of the corporate debtor;

(iii) tangible assets, whether movable or immovable;

(iv) intangible assets including intellectual property;

(v) securities including shares held in any subsidiary of the corporate debtor, financial instruments, insurance policies;

(vi) assets subject to the determination of ownership by a court or authority;

• to perform such other duties as may be specified by the Board.

Conclusion: The IBC has clearly outlined the powers and duties of the interim resolution professional that he can exercise during the insolvency resolution process. He is required to act according to the Code and follow it during the tenure of IRP. The IRP’s role in conducting the procedure is most important for the successful Resolution of a company under CIRP.