Insolvency Practitioner: Roles, Duties, and Activities

Posted by Registrationwala on March 29th, 2019

The Insolvency and bankruptcy Code has provided us with many processes and all of these processes are directed towards a single goal-ensuring that the debtors pay their debtors. Therefore, it can be said that the code have made a deep impact on the Indian economy. However, what if the debtors become insolvent aka, are not able to repay anything? Well, in this condition, the purpose of IBC is finally revealed, to resolve the insolvency to such a debtor. The ones who are instrumental in conducting such process, the Insolvency practitioners need to be specialized professionals. Through this blog, we are going to look into their roles, their activity, and the qualities that they must possess.

Insolvency Practitioner: The definition

Insolvency practitioner refers to its proper name: Insolvency professional. An insolvency professional is the one that creates an insolvency resolution plan during the process to resolve the insolvency. It is this professional that provides a “way-out” to the company.

Insolvency Practitioner: The Roles

Insolvency practitioners are Insolvency professionals. However, do not think that formulating the insolvency resolution process is the only role that they play. In addition to creating an insolvency resolution plan, they also have to play the following rules:

1. Acting as the agent of Corporate Debtor in the NCLT (National Company Law Tribunal): The corporate debtor is the one that appoints the Insolvency professional. The professional is the liaison between the debtor and the tribunal. All the information about the proceedings including reports, books, records and other details are sent to the NCLT with the aid of an Insolvency Practitioner.
2. Acting as a liquidator: There is a secret that you must know: you should always assume that the insolvency resolution plan isn’t going to pan out. When the process fails, or the committee of creditors rejects it, the next step is liquidation. At that point, the insolvency practitioner takes on the role of a liquidator. The responsibility of the liquidator, among many things, is to put a proper price tag on the debtor’s assets.
3. Formulating the insolvency resolution plan: Perhaps the most important task of the Insolvency practitioner is to formulate a proper plan of insolvency resolution.

The above roles are played with particulars activities in mind. This brings us to the next section of our blog.

Insolvency practitioner: The activities

In order to complete his job, the Insolvency practitioner has to do the following:

1. Identifying the NPAs of the companies: NPAs are Non-Performing Assets that just remain and don’t just hold any value to the company, other than being pricey. These assets don’t contribute in any cash inflow. Therefore, the IP identifies these assets first.
2. Managing the NPAs: Just identifying the Non-Performing assets is not important. If the assets hold some value, they must be used for something.Finding the usage of such assets is another job for the IP.
3. Taking the control of the business relations of the company: It is the primary task of the IP to take control of the business relations from the leader of the company. In doing so, they are able to manage the company until the Insolvency resolution process is over with.
4. Preparing a resolution plan: IPs primary job is to tap into the information utility, and then use that information to create reports about the company. The generated reports are then used to create an insolvency resolution plan.
5. Presenting the plan at the NCLT: Once the plan is created, it is presented to the Committee of Creditors at the NCLT through the IP. As we have already stated, IP acts as a liaison between the debtor and the tribunal.

These are the activities of the practitioner as an Insolvency professional. However, he needs to take the Duties of a liquidator is the plan is not accepted by the Committee of Creditors.

Insolvency practitioner: The Qualities

This section is going to provide you details about the qualities that an insolvency practitioner must have:

1. The practitioner should be older than 18 years of age.
2. The practitioner should be born in India
3. There should be no court cases against the professional
4. The practitioner should not be insolvent himself
5. The practitioner should be of a sound mind and character.

The above mentioned points are taken into account during appointment of Insolvency professional. If you want to know more about these experts, feel free to connect with Registrationwala.