Best practices for insolvency resolution professional

The Insolvency Professional ("IP") registered with the Insolvency and Bankruptcy Board of India (IBBI) appointed in the resolution process and to act on behalf of such an insolvent individual, companies, LLPs or partnerships. National Company Law Tribunal while admitting the application of Corporate Insolvency Resolution Process appoints an independent Insolvency Professional as the custodian of the assets of the Corporate Debtor ("CD") and to manages the affairs as a going concern.

IP is vested with the power of board of directors and the management of the affairs of the company. Insolvency Profession is also emerging with the pace of the law. Hence, there responsibilities require the highest level of competence and veracity.

Best Practices in any profession needs to be developed for achieving the consistent and desired result. The purpose of best practice for IPs is to endorse and uphold high moral and professional ethics required to be followed under the Code in order to attain uniform approach of the working of the IPs.

An IP must have valid registration/license and should meet the eligibility criteria throughout the validity of registration/license. If at any point of time after obtaining the registration license from IBBI any eligibility criterion is violated; IP shall duly report such event to the Insolvency Professional Agency ("IPA") with whom IP is enrolled and to IBBI.

An IP shall be eligible to be appointed as a resolution professional ("RP") for CIRP of a corporate debtor if he/she is independent of the corporate debtor in accordance with Regulation 3 of the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016 ("CIRP Regulations").

Where the committee shall obtain the written consent of the proposed resolution professional in the prescribed Form AA before appointing the IRP as RP or replace the IRP with new RP.

The First Schedule of the Insolvency and Bankruptcy Board of India (Insolvency Professionals) Regulations, 2016 ("IP regulation") provides for the Code of Conduct for IPs which needs to be reported and regulated by IBBI & IPA in accordance with the code read with rules and regulations.

Integrity and Objectivity:

• must maintain integrity.
• must not misrepresent and refrain from action that disrepute to the profession.
• must act with objectivity.
• must disclose the details of any conflict of interest to the stakeholders.
• must not acquire any of the assets of the debtor.

Independence and Impartiality:

• maintain complete independence.
• ensure that he or his relatives do not knowingly acquire any assets.
• shall not take up an assignment, if he, any of his relatives in relation to the corporate. person/ debtor and its related parties.
• shall disclose the existence of any pecuniary or personal relationship with any of the stakeholders entitled to distribution under the code.
• shall disclose as to whether he was an employee of or has been in the panel of any financial creditor ("FC") of the CD, to the committee of creditors ("CoC") & IPA.
• shall not influence the decision or the work of the CoC or debtor, or other stakeholders.

Professional Competence

• continue to enhance professional knowledge & skills.

Representation of correct facts and correcting misapprehensions

• must inform about the misapprehension or wrongful consideration of a fact.
• must not obscure any important information or significantly make an illusory assertion.

Timeliness

• must adhere to the time limits prescribed in the Code.
• must not act with mala fide or be negligent while performing his functions and duties.

Information Management

• must make efforts to ensure that all communication to the stakeholders.
• must ensure that he maintains written records and the information and evidence.
• must not make any private communication with any of the stakeholders.
• must appear, co-operate and be available for inspections and investigations.
• must provide all information and records as may be required.
• must provide information for any audit, research & periodic study.

Confidentiality

• must ensure that confidentiality of the information relating to the process is maintained at all times.

Occupation, employability and restrictions

• must refrain from accepting too many assignments.
• must not engage in any employment when he holds a valid authorization for assignment.
• if conducted a CIRP, he and his relatives shall not accept any employment.
• shall not provide or engage or appoint any of his relatives or related parties, for or in connection with any work relating to any of his assignment.
• must not conduct business which in the opinion of the IBBI is inconsistent.

Remuneration and costs

• must provide charge remuneration for services in a transparent manner.
• shall disclose the fee payable to him, insolvency professional entity ("IPE"), and the fee payable to professionals engaged by him to the IPA.
• shall not accept any additional levies or charges other than those which are disclosed and agreed upon.
• shall disclose all costs towards the process costs.
• Gifts and hospitality
• must not accept gifts or hospitality which undermines or affects his independence.
• shall not offer gifts or hospitality or a financial or any other advantage to a public servant or any other person.

Duties of the IP during the CIRP

IP must take the duties prescribed under the code with utmost care and diligence which are as follows:

• take in control & custody of the assets of the CD immediately after the appointment as IRP.
• Maintain records and keep the records for the period mentioned in the provisions.
• Managing the affairs and keep the business of the CD as going concern.
• monitor the assets of CD.
• preserve and protect the assets of the CD.
• collect all information relating to the finances, assets, liabilities, and operations of the CD.
• receive, collate and verify all the claims submitted by creditors.
• constitute the committee of creditors;
• conduct meeting of the CoC.
• must assure that matters affecting the interest of the stakeholders be placed before the CoC.
• Allow access of the records, notices and minutes of the CoC to the creditors and the suspended board of directors.
• the communications to all the stakeholders in the form of notices, updates, directions, reports or clarifications, are made in advance in a simple and clear manner
• represent and act on behalf of the CD with third parties,
• raise interim finances with the approval of CoC
• appoint two Registered Valuers for the valuation of the assets of the CD
• appoint accountants, legal or other professionals for their support in the process
• filing of application for avoidance transactions in accordance with the code
• maintain an updated list of claims by creditors
• convene and attend all meetings of the CoC
• prepare the information memorandum
• invite prospective resolution applicants for submitting the resolution plans
• present all resolution plans at the meetings of the CoC
• maintain records of all assignments undertaken for at least 3–4 years from the assignment completion.

OTHER CONSIDERATIONS

• shall not accept any assignment under the Code during the event of the issuance of show cause notice by IBBI.
• shall not raise the bill for the work done by IPE
• should refer to the Charter of Responsibility of IP and CoC in order to ensure performance of all the duties of his/her part.
• should endeavour to maintain good rapport with the participants of the CoC in order to ensure smooth conduct of the meetings.
• should have a process in place to promptly reply to the concerns of the stakeholders while maintaining confidentiality.

Thus, IP must have professional knowledge and maturity along with the multi-dimensional skills, involving interpersonal, leadership, communication, conflict resolution, negotiation and stress management.

However, for rendering non-core responsibilities, an IP has discretion to appoint or take support from specialized officers, yet needs to lead the initiative from front and drive value creation with support of all the stakeholders with varied and conflicting interests.