The Vital Role of Insolvency Professionals In The Working of CIRP

The emergence of the Covid-19 outbreak has significantly influenced our economy, businesses, lives, as well as the incomes of individuals in so many ways. In reality, there has been a substantial effect on businesses of diverse sizes, and regrettably, some of them have even been forced to cease operating and liquidate their organisations. Fortunately, the Insolvency and Bankruptcy Code safeguard the legal rights and duties of companies that have declared bankruptcy or become insolvent.

The complete corporate insolvency resolution process is carried out by insolvency professionals who are competent and skilled insolvency accountants or specialists while safeguarding the rights of the guilty debtors. The CIRP grants you a period of 330 days to settle your insolvency using legal norms and mechanisms. To fully grasp the Corporate Insolvency Resolution Process and the role of resolution professionals in it, you must first recognize the two different forms of insolvencies, which are as follows:

Cash-flow Insolvency: This kind of insolvency occurs when a company or business runs out of liquid funds to pay down its debts but still has enough assets to cover those debts. The inability to meet loan obligations due to a scarcity of liquid assets or cash on hand is known as cash flow insolvency.

In this case, the insolvency professionals can disclose all of the company's assets and recommend that the assets be sold in exchange for cash to be used to settle the debt. Additionally, insolvency professionals can also bargain and buy the business sometimes.

Balance-sheet Insolvency: In this sort of Insolvency, the probability of the insolvency proceedings being filed are high since the business, or the company is low on both cash and assets. Therefore, it is known as balance-sheet insolvency when the business or company lacks the assets necessary to repay a debt acquired from creditors.

Significance of Insolvency Professionals in the Corporate Insolvency Resolution Process

To start the dissolution process efficiently and accurately, an insolvency professional must evaluate and examine the company's financial situation by documenting and counting every one of its debts and assets. These professionals are also qualified and trained to hunt for prospects and methods to save businesses and organisations. In addition, the following are the primary responsibilities of insolvency professionals:

• Study all of the company's paperwork and the financial statement to assess and comprehend its financial status.
• Make all necessary arrangements to start the liquidation of all of the bankrupt person's or entity's assets.
• Evaluate and understand the company's or business's receivables condition and handle the complete collection procedure.
• Arrange and conduct official negotiations with debtors or creditors and manage the settlement procedure.
• One of the primary responsibilities of insolvency professionals is to validate and corroborate the claims filed by creditors in light of the available funds and assets.
• After putting aside the funds necessary to cover the liquidation cost, the insolvency experts also participate in the fund distribution procedure.
• If there are issues related to competitor organisations, they are handled by insolvency accountants or specialists.

In addition, it is the role and duty of the insolvency professional to prepare and deliver a report to the National Company Law Tribunal regarding the following:

• Within 75 days of the beginning of the process, the insolvency professionals must produce a report for the liquidation plan and procedure.
• The creation and submission of a detailed asset memorandum report is required.
• A regular interim report on the status of the liquidation procedure.
• The minor details about selling the business or corporate assets for debt repayment.
• An insolvency professional must keep a record of every conversation they have with creditors and debtors, as well as their settlement conclusions.
• A last report before the firm, businesses, and others are dissolved.

Eligibility Criteria of the Insolvency Professionals

A person must first register with a reputable corporate consulting firm or an insolvency professional agency to meet the fundamental requirements for becoming an insolvency professional. A person must possess the following qualifications and expertise in order to register:

• They must clear the National Insolvency Examination or
• The candidate must have successfully completed and passed the Limited Insolvency Examination, in which case they must have 15 years of management experience after the completion of their bachelor's degree from a university that is founded or recognised by law or
• They must have completed the Limited Insolvency Examination and have at least ten years of experience in one of the following roles:

1. Chartered Accountant (CA) and is a representative of ICAI.
2. Company Secretary and member of the ICSI
3. Cost Accountant and member of the Institute of Cost Accountants of India
4. Enrolled Advocate with a Bar Council.

Sum Up

The Insolvency professionals role is crucial to the complete CIRP process. He has a variety of duties and tasks that he must do. As per the Bankruptcy and Insolvency code, A resolution specialist's principal responsibility is to carry out the corporate insolvency resolution process in a transparent manner. Additionally, the insolvency professional must have the relevant skills to fulfil the duties and obligations assigned to him and guarantee that the procedures are carried out efficiently.