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Responsibilities of Insolvency Professionals Under IBC

Therefore, insolvency professionals are a lifeline for any company that is about to file for bankruptcy.

Due to poor financial management by financial entities and other global issues, bankruptcy is facing a surge. Nowadays, new roles have emerged, such as an insolvency professional who provides helpful advice to financial entities worldwide. Strict laws have been established to speed up the process of retrieval of the money borrowed by borrowers. It has transformed the possession recovery process into a customer-run process. Therefore, as part of a resolution process, the insolvency professionals take management of the aggravating company and assume responsibility for it along with its financial creditors.

If a firm does not have enough cash on hand to pay its debts and you are also under pressure from financial lenders, consider seeking assistance from an insolvency professional. Now, let’s learn more about the working of these professionals.

Roles Played by an Insolvency Professional

  • The insolvency professional plays an indispensable part in the insolvency proceedings as in addition to managing the corporate debtor’s operations as a going concern; he also must communicate with and guide the management, and handle legal matters, besides the proceedings in the National Company Law Tribunal, submit periodic reports to the NCLT and Committee of Creditors (CoC), locate potential Resolution applicants, facilitate data rooms, organise due diligence, assess Resolution Proposals, form and meet with the Creditors in CoC, and attempt to evolve the situation. 
  • In merger and acquisitions ( M&A) and takeover transactions, a highly comprehensive Information Memorandum (IM) is necessary, and it is usually created with the assistance of insolvency professionals.
  • Further, during liquidation, the professional assumes the position of the liquidator in which the insolvent company’s assets are gathered and liquidated to help pay off its creditors.
  • The IP will have the challenging job of handling the varied demands within the allotted time frames. It plays a significant role in managing disputes between corporate debtors and financial creditors and the adjudicatory authorities subject to IBBI regulation.

Responsibilities of an Insolvency Professional

The primary responsibility of insolvency professionals is to assess the financial position of a business, corporation, or partnership firm. After the initial step, it is the responsibility of these professionals to ensure that the process runs smoothly. After a thorough examination, if they believe it is possible to revive the business, they do all in their power to bring it to its original state.

The primary responsibilities are as follows:

  1. To better comprehend the company’s financial status.
  2. Establish plans while conducting official meetings with clients and creditors and working on the settlements.
  3. Another crucial responsibility is to verify and approve the creditors’ claims as per the available funds.
  4. Make sure the assets are auctioned off properly while liquidating the organization.
  5. Pay the liquidation costs and distribute the remaining funds.
  6. To compile a thorough report after assessment and present it to the National Company Law Tribunal with the information listed below:
  • The insolvency professional starts the process after submitting an extensive plan and procedure for the asset liquidation to the authority within 75 days.
  • Make a thorough report while the process is still in progress.
  • Complete details on the asset or real estate sale.
  • Communicate with the borrowers and lenders and update them on the situation.
  • Curate a report on the outcome of the organisation’s dissolution process.

Conclusion

No company wants to find itself in such a predicament. In order to prevent matters from getting worse, insolvency professionals take the necessary steps. In such times, it is recommended that a firm in distress seek help from such professionals and insolvency technology for swift and accurate resolution updates.

Therefore, insolvency professionals are a lifeline for any company that is about to file for bankruptcy. Although the professional should have superior skills and knowledge, hiring someone with years of expertise is always beneficial.