An insolvency professional is a licensed expert registered with the Insolvency and Bankruptcy Board of India (IBBI). They are trained and authorized to manage the insolvency and bankruptcy processes for individuals, companies, limited liability partnerships (LLPs) or partnership firms that are unable to pay their debts. These professionals ensure that the process is conducted fairly, transparently and in line with the Insolvency and Bankruptcy Code (IBC), 2016. Their work focuses on either saving businesses that can still function or selling the assets of businesses that cannot continue, in an orderly manner, to repay debts. By doing so, insolvency professionals help maintain trust in India’s financial system and contribute to economic stability.
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What Do Insolvency Professionals Do?
To make sure that insolvency cases are handled fairly and easily, insolvency professionals take on a wide range of responsibilities. The main thing they do is look at the insolvent entity's (a person or a business) finances and advise on how to either fix the problems or get rid of the assets. Here is a clear list of their main responsibilities
Financial Assessment: They carefully examine the entity’s financial records, such as balance sheets and income statements, to understand its assets (what it owns), liabilities (what it owes) and overall financial health.
Asset Management: They organize and manage the sale of the entity’s assets, like property, machinery or equipment, to raise funds to pay off debts.
Receivables and Collections: They work to recover any money owed to the entity, such as unpaid invoices from customers or clients.
Stakeholder Negotiations: They act as a neutral mediator between the debtor (the entity that owes money) and creditors (those who are owed money) to negotiate fair repayment plans or settlements.
Creditor Claim Verification: They review and verify claims made by creditors to ensure accuracy and prioritize them based on legal guidelines and available funds.
Fund Distribution: After selling assets, they distribute the proceeds to creditors, ensuring that liquidation costs (like legal or administrative fees) are paid first.
Conflict Management: They balance the competing interests of different stakeholders, such as creditors, employees and shareholders, to ensure fairness.
Reporting to NCLT: They prepare and submit detailed reports to the National Company Law Tribunal (NCLT) within 75 days of starting the process. These reports include plans for liquidation, details of assets, progress updates, information on asset sales and a final report before the entity is dissolved.
Key Responsibilities
Insolvency professionals must remain impartial, act in the best interests of creditors and the public and follow strict legal and ethical standards to ensure the process is transparent and fair.
Responsibility | Description |
Financial Assessment | Review financial records to understand the entity’s assets, liabilities and health. |
Asset Management | Organize and sell assets to generate funds for debt repayment. |
Receivables and Collections | Collect money owed to the entity, such as unpaid invoices. |
Stakeholder Negotiations | Mediate between debtors and creditors to reach fair agreements. |
Creditor Claim Verification | Verify and prioritize creditor claims based on funds and legal rules. |
Fund Distribution | Distribute money from asset sales to creditors after covering costs. |
Conflict Management | Balance the interests of creditors, employees and shareholders fairly. |
Reporting to NCLT | Submit detailed reports, including liquidation plans and final reports, within 75 days. |
Find out What Insolvency is?
How to Become an Insolvency Professional
Becoming an insolvency professional in India requires meeting specific eligibility criteria and qualifications that are set by the IBBI. Below is a step-by-step process and in order to qualify, you must
Be a resident of India and over 18 years old.
Be of sound mind and not disqualified by any law.
Be financially solvent (not declared insolvent yourself).
Not have been convicted of crimes involving moral turpitude or sentenced to more than six months in prison. If convicted, at least five years must have passed since the sentence ended.
Qualifications and Experience
To become an insolvency professional, you need to meet one of these requirements
Pass the National Insolvency Examination or
Pass the Limited Insolvency Examination and have 15 years of management experience after earning a Bachelor’s degree or
Pass the Limited Insolvency Examination and have 10 years of experience as a Chartered Accountant, Company secretary, Cost accountant or Advocate.
Registration Process
The registration process is simple, it includes joining an Insolvency Professional Agency and then get registered with the Insolvency and Bankruptcy Board of India
Join an Insolvency Professional Agency (IPA): Register with an IPA, such as those affiliated with the Institute of Chartered Accountants of India (ICAI), Institute of Company Secretaries of India (ICSI) or Institute of Cost Accountants of India (ICMAI). IPAs provide training and ensure professionals follow ethical standards.
Register with the IBBI: After joining an IPA, complete the registration process with the IBBI to become a licensed insolvency professional.
Regulatory Framework for Insolvency Professionals
The Insolvency and Bankruptcy Code (IBC), 2016, is the primary law governing insolvency professionals and the IBBI oversees their registration and regulation. Insolvency Professional Agencies (IPAs), registered as Section 8 companies under the Companies Act, 2013, also play a key role by
Granting membership to insolvency professionals.
Setting standards for performance and professional conduct.
Protecting the rights, duties and interests of insolvency professionals.
Handling complaints and, if necessary, suspending or cancelling memberships.
Insolvency professionals must follow a strict code of conduct, which includes
Acting with care and diligence.
Following IPA rules and regulations.
Allowing inspections of their records.
Submitting records of proceedings to the IBBI and IPA.
The IBBI can investigate and take disciplinary action under Sections 217-220 of the IBC to ensure professionals remain accountable and maintain high standards.
Types of Insolvency Proceedings
Insolvency professionals handle different types of insolvency cases under the IBC. These processes ensure that insolvency cases are managed systematically, either by saving the business or closing it in an orderly way
CIRP: Corporate Insolvency Resolution Process aims to resolve the financial distress of a corporate debtor (a company). A resolution professional verifies creditor claims, forms a committee of creditors and helps create a plan to revive the business.
Liquidation: If no revival plan is approved, the company is liquidated. The insolvency professional acts as the liquidator, selling assets and distributing the proceeds to creditors.
Personal Insolvency: This involves individuals who cannot pay their debts. The professional manages bankruptcy or debt resolution processes for individuals.
Voluntary Liquidation: For solvent companies that choose to close operations, the insolvency professional acts as the liquidator to wind up the business in an orderly manner.
Why Are Insolvency Professionals Important?
Insolvency professionals are vital to India’s economy because they
Help resolve financial distress efficiently, ensuring resources are used effectively.
Either revive viable businesses or liquidate distressed assets fairly.
Preserve jobs by saving businesses that can continue operating.
Maintain trust among creditors by ensuring fair and transparent processes.
Support India’s ranking in global ease-of-doing-business reports by providing clear exit paths for failing companies under the IBC.
Build confidence in the financial system through their work in restructuring businesses and fairly distributing assets.
Challenges Faced by Insolvency Professionals
Insolvency professionals encounter several challenges in their work and so it requires strong expertise, resilience and ethical conduct
Complex Legal Framework: The IBC and its regulations are detailed and frequently updated, so professionals must stay informed and adapt quickly.
Emotional Stakes: Their decisions impact employees, creditors and other stakeholders, which can create emotional pressure.
Impartiality: Balancing the conflicting interests of different stakeholders while remaining fair and transparent is challenging.
Time Constraints: The IBC sets strict deadlines, such as completing the CIRP within 270 days, which can be difficult to meet.
Summary
The Indian system for insolvency and bankruptcy relies heavily on insolvency professionals. In order to meet the needs of creditors, debtors and the public, they make sure that financial problems are solved in a structured, fair and clear way. Their knowledge of financial analysis, negotiation and following the law is very important for saving businesses that are having trouble or quickly selling off assets. As the IBC changes, people who work in insolvency will still be very important for keeping the economy stable and building trust in India's financial system. Even though they have problems, their work is very important for encouraging people to become entrepreneurs and effectively dealing with assets that are in trouble.
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Insolvency professionals: FAQs
Q1. What does an insolvency professional do?
An insolvency professional manages the liquidation or restructuring of insolvent companies or individuals. They handle tasks like selling assets, negotiating with creditors and following legal processes under the Insolvency and Bankruptcy Code, 2016.
Q2. What is the salary of an insolvency professional?
Salaries typically range from ₹2.8 lakh to ₹17 lakh per year. Experienced professionals may earn ₹1-5 lakh per month per case, depending on their expertise and the size of the case.
Q3. Is insolvency a good career?
Yes, it is a challenging but rewarding career with growing demand. It offers opportunities to work on business restructuring, earn competitive salaries and network with top professionals in the field.
Q4. What qualifications are required to become an insolvency professional?
You must pass the Limited Insolvency Examination and have 10 years of experience as a chartered accountant, company secretary, cost accountant or advocate or complete the Graduate Insolvency Programme (GIP).
Q5. Who is eligible to become an insolvency professional?
Eligible candidates are Indian residents over 18, of sound mind, not insolvent, with no serious criminal convictions and who meet the IBBI’s qualification criteria, such as 10 years of professional experience or completion of the GIP.
