Role, Duties & responsibilities of IP under IBC

Duties and responsibilities of Insolvency Professional under the IBC

• Code of Conduct
• Ethics
• Professional Standards
• Conflict Management
• Reporting Mandates
• Protection available to IPs (with)ss

Framework Corporate Governance & Ethics for Insolvency Professionals Under the IBC law

• IBBI (Insolvency Professional), Regulations 2016
• Insolvency and Bankruptcy Code, 2016
• IBBI (Grievance and Complaint Handling) Regulations, 2017
• The IBBI (Inspection and Investigation) Regulations, 2017

Objects of IBC

An Act to consolidate and amend the laws relating to reorganisation and insolvency resolution of corporate persons, partnership firms and individuals

• in a time bound manner
• for maximization of value of assets
• of such persons
• to promote entrepreneurship

The Four Pillars

• Adjudicating Authority (AA)
• Regulator (IBBI)
• Information Utility

IBBI to provide model bye-laws

196. Powers and functions of Board. –

(2) The Board may make model bye-laws to be to adopted by insolvency professional agencies which may provide for

• (a)………;
• (b) the standards for professional and ethical conduct of the members of insolvency professional agencies;

Overview – Key Provisions under the IBC Code

• 208(2) Code of Conduct and Inspection by IPA
• 217 Complaints against IP, IPA, IU
• 218 Inspection or Investigation of IP, IPA, IU
• 219 Show cause notice to IP, IPA, IU
• 220 Appointment of Disciplinary Committee and powers to impose penalty
• 70(2)Punishment when IP deliberately contravenes the provisions
• 235A Punishment where no specific penalty or punishment is provided
• 236 Trial of offences by special courts

208(2) Every insolvency professional shall abide by the following code of conduct: –

• insolvency professional to take reasonable care and diligence while performing his duties;
• He has to comply with all requirements and terms and conditions specified in the byelaws of the insolvency professional agency of which he is a member;
• IP needed to allow the insolvency professional agency to inspect his records;
• Insolvency professional submit a copy of the records of every proceeding before the Adjudicating Authority to the Board as well as to the insolvency professional agency of which he is a member; and
• IP required to perform his functions in such manner and subject to such conditions as may be specified.

Roles for Insolvency Professional under the IBC

• Interim Resolution Professional (IRP)- Sec 16 (1)
• Resolution professional (RP)- Sec, 5 (27) and 79 (21) for    CIRP or for fresh start and insolvency resolution process for  Individuals and Partnership Firms
• Liquidator – Sec 5 (18)  for Corporate Persons
• Bankruptcy Trustee (BT)- Sec 79 (9)  for Individuals and Partnership Firms
• Represent a Financial Creditor if applicant is a Consortium – Sec 21 (6) (c)
• They may Represent any member of the committee of creditors -Sec 24 (5)
• Authorised Representative (AR) of a class of Creditors Sec 21 (6) & (6A)

Key Responsibilities of IRP/ IP under the IBC

• Taking over management control of CD
• Verification of claims – in case large number of creditors – house buyers, fixed deposits,
• Organising CoC Meetings – e-voting, audio video recording, where large number of members, representatives without decision making power
• Arranging Interim finance to keep CD as a Going Concern
• Valuation – Different categories of assets including IPR, inventory and debtors
• Preparation of Information Memorandum and RFRP
• Expression of Interest and Inviting Resolution Plan
• Examine each resolution plan to confirm that it does not contravene any of the provisions of the law for the time being in force.
• Disclosures
• Reporting to IPA, IBBI, NCLT

Functions and Authority of Insolvency Professional under the IBC

• exercises the powers of the board of directors
• vested with the management
• is custodian of the property
• manages the company as a going concern
• These responsibilities require the highest level of integrity, reputation and character
• IRP shall be responsible for complying with the requirements under any law for the time being in force on behalf of the CD. Sec 17(2) (e)
• The IRP shall make every endeavour to protect and preserve the value of the property of the corporate debtor and manage the operations of the corporate debtor as a going concern. Sec 20(1)
• It shall be the duty of RP to preserve and protect the assets of the CD, including the continued business operations of the CD. Sec 25(1)
• RP shall not take any of the actions listed in 28 without the prior approval of the CoC

5 Fundamental Principles of Ethics for Insolvency Professional:

a) Integrity – to be straightforward and honest in all professional and business

b) Objectivity – not to compromise professional or business judgments because of bias, conflict of interest or undue influence of others.

c) Professional Competence and Due Care – to:

1. 1. Attain and maintain professional knowledge and skill at the level required to ensure that a client or employing organisation receives competent professional service, based on current technical and professional standards and relevant legislation; and
   2. Act diligently and in accordance with applicable technical and professional standards.

d) Confidentiality – to respect the confidentiality of information acquired as a result of professional and business relationships.

e) Professional Behaviour – to comply with relevant laws and regulations and avoid any conduct that the IP knows or should know might discredit the profession

Insolvency Professional the FULCLUM

• Adjudicating Authority (AA)
• Regulator (IBBI)
• Stakeholders

Protection for Insolvency Professional under IBC law

• 19(2) Where any personnel of the corporate debtor, its promoter or any other person required to assist or cooperate with the IRP does not assist or cooperate, the IRP may make an application to the Adjudicating Authority for necessary directions.
• Section 233 No suit, prosecution or other legal proceeding shall lie against the Government or any officer of the Government, or the Chairperson, Member, officer or other employee of the Board or an insolvency professional or liquidator for anything which in done or intended to be done in good faith under this Code or the rules or regulations made thereunder.
• 236(2) No Court shall take cognizance of any offence punishable under this Act, save on a complaint made by the Board or the Central Government or any person authorised by the Central Government in this behalf.

Key Issues Insolvency Professional under the IBC Face

• Sustainability of IPs – Fee and Payment of Fee
• Appointment and Exit
• Approval of CoC
• Compliance and reporting mandate
• Litigation and non-cooperation
• Infrastructure support, technical and operational capability to run large and complex business
• Indemnity for Actions taken in good faith
• Appointment
• Fee
• Compliance
• Litigation