The world of business can be unpredictable. Sometimes, companies face financial troubles that make it hard for them to pay their debts. In India, the Insolvency and Bankruptcy Code, 2016 (IBC) was introduced to help handle such situations in a fair and efficient way. This law aims to resolve insolvency issues quickly, maximize the value of assets and promote entrepreneurship. A key figure in the Act is the Interim Resolution Professional (IRP) who is a temporary manager who steps in during a crisis to keep things running smoothly until a long-term plan is in place. In this article, we'll break down what an IRP does, how they are appointed, their responsibilities, powers, and why they matter.
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What is the Insolvency and Bankruptcy Code, 2016?
Before diving into the IRP, let's quickly understand the IBC. Enacted in 2016, the IBC is a comprehensive law that deals with insolvency and bankruptcy for companies, partnerships and individuals. Insolvency means a situation where a person or company can't pay their debts on time. Bankruptcy is the legal process that follows when insolvency leads to asset distribution among creditors (people or entities owed money).
The IBC replaced older, fragmented laws and created a unified system. It sets up institutions like the National Company Law Tribunal (NCLT) as the adjudicating authority, the Insolvency and Bankruptcy Board of India (IBBI) as the regulator, and insolvency professionals to manage the process.
The goal is to resolve cases within a strict timeline usually 180 to 330 days for corporate insolvency to avoid prolonged uncertainty that could harm businesses and the economy.
One of the key processes under the IBC is the Corporate Insolvency Resolution Process (CIRP). This is triggered when a company defaults on a debt of at least ₹1 crore. During CIRP, the focus is on reviving the company if possible, rather than liquidating it right away. That's where the Interim Resolution Professional comes in as the first line of action.
Find out What Insolvency is.
Who is an Interim Resolution Professional?
An IRP is an insolvency professional appointed temporarily to oversee the initial stages of the CIRP. They are like a neutral referee in a game, ensuring fairness for all parties, creditors, debtors (the company in trouble), employees and others.
To become an Interim Resolution Professional, a person must meet strict eligibility criteria set by the IBBI. They need to be at least 18 years old, of sound mind, a resident of India, and not insolvent themselves. They can't have been convicted of an offense punishable with imprisonment for more than six months in the last three years.
Professionally, they must have at least 10 years of experience as a chartered accountant, company secretary, cost accountant, or advocate, or 15 years in management roles. They also need to pass the Limited Insolvency Examination and complete pre-registration courses like the National or Graduate Insolvency Programme. Once qualified, the IBBI issues a certificate of registration.
Interim Resolution Professionals are regulated by a code of conduct to ensure they act with integrity, independence, and objectivity. They must avoid conflicts of interest, like not having financial ties to the debtor or creditors.
Importance and Challenges Faced by IRPs
The Interim Resolution Professional stabilize the company during the chaotic early days of insolvency. By managing operations and forming the CoC, they lay the groundwork for revival and so, without an effective IRP, assets could deteriorate, which can lead to lower recovery for creditors and job losses.
However, challenges exist. IRPs often deal with resistant management, incomplete records, or pressure from influential creditors. Timelines are tight, and mistakes can lead to legal disputes. The IBC has evolved through amendments and precedents to address these challenges along with emphasizing transparency and speed.
For example, in cases of Essar Steel, the role of resolution professionals (including IRPs) was scrutinized. Overall, IRPs help balance stakeholder interests, promoting trust in the insolvency system.
Read about Creditor vs Debtor to find out their Differences.
Appointment of the Interim Resolution Professional
The appointment of an Interim Resolution Professional happens quickly to prevent asset mismanagement during insolvency. According to Section 16 of IBC, the NCLT appoints the IRP on the insolvency commencement date, which is when the application for CIRP is admitted. This must be done within 14 days of admission.
The process varies based on who files the application:
If a financial creditor (like a bank) or the corporate debtor itself applies, they propose an IRP's name. The NCLT appoints this person if no disciplinary proceedings are pending against them.
If an operational creditor (like a supplier) applies without proposing a name, the NCLT asks the IBBI for a recommendation. The IBBI suggests a suitable professional within 10 days in order to ensure that there are no pending issues.
Once appointed, the IRP makes a public announcement within three days in a specified format (Form A) to invite claims from creditors. This announcement is published in newspapers and on the company's website to ensure transparency. The IRP's term is limited to 30 days or until a permanent Resolution Professional (RP) is appointed, whichever comes first.
This immediate appointment is important because from the insolvency commencement date, a moratorium (a legal pause) kicks in. This stops all lawsuits, asset transfers, or enforcement actions against the company, giving breathing space to resolve the issues.
Duties of the Interim Resolution Professional under Section 18 of IBC
Section 18 of IBC lays down the duties that an Interim Resolution Professional must perform during the Corporate Insolvency Resolution Process (CIRP). These duties are designed in order to ensure transparency, protect the assets of a company and proceed with a fair resolution process. As per Section 18, the Interim Resolution Professional must:
Collect All Relevant Information: Gather comprehensive details about the corporate debtor’s assets, financial status and business operations, typically covering the past two years. This helps create an accurate picture of the company’s financial health.
Receive and Collate Claims: Accept claims submitted by creditors (those owed money) after the public announcement of the insolvency process. The IRP verifies these claims and maintains an updated list to ensure accuracy.
Constitute the Committee of Creditors (CoC): Form the CoC (Section 21), which consists of financial creditors (like banks or institutions owed money). This committee, set up within 30 days, makes key decisions during the resolution process.
Monitor and Manage Assets: Take custody and control of all the corporate debtor’s assets, ensuring they are protected from misuse, theft or loss. This includes both physical assets (like property) and intangible ones (like intellectual property).
Manage Day-to-Day Operations: Oversee the company’s ongoing operations to keep it running as a “going concern” (a business that continues functioning without shutting down). This might involve managing employees, suppliers, or contracts.
File Information with Information Utilities: Submit relevant financial and operational data to information utilities, which are specialized repositories that store and manage creditor information for transparency.
Perform Additional Duties as Specified: Comply with any other requirements set by the Insolvency and Bankruptcy Board of India (IBBI), such as adhering to legal standards, disclosing insolvency costs, or ensuring compliance with the IBC’s regulations.
Also read about Section 12A of IBC, 2016.
Powers of the Interim Resolution Professional
Under Section 17 and Section 20 of the IBC, IRPs have a lot of power to do their jobs. They do not have unlimited power, though. The IRP can't turn down claims or plans on their own; they have to follow what the CoC says. The Supreme Court also made it clear that the IRP only helps with the process and cannot stop CoC decisions. They have to follow the IBBI's code of conduct and act without being influenced or having a personal stake in what they do.
Exercise all powers of the board of directors, including making decisions on contracts, hiring or operations.
Appoint professionals like lawyers or valuers to assist.
Access electronic records from information utilities or government bodies.
Apply to the NCLT for relief if needed, such as protecting assets from threats.
Preserve the company's value by taking steps like negotiating with suppliers or securing funding.
Summary
The Interim Resolution Professional ensures a smooth start to the insolvency resolution process. From appointment to handing over to the RP, they handle critical tasks with professionalism and impartiality. By protecting assets and facilitating creditor involvement, IRPs contribute to India's goal of a robust business environment where failures are resolved efficiently, encouraging innovation and investment. As the IBC matures, the role of IRPs will likely become even more refined. For anyone involved in business or finance, understanding this role highlights how India is modernizing its approach to economic challenges. If your company faces financial stress, knowing about the IRP can prepare you for what lies ahead.
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Interim Resolution Professional: FAQs
Q1. Who is an Interim Resolution Professional?
An Interim Resolution Professional (IRP) is a temporary manager appointed to oversee a company’s insolvency process under the IBC, 2016, ensuring fairness and smooth operations.
Q2. What does interim resolution mean?
Interim resolution is the initial phase of the Corporate Insolvency Resolution Process (CIRP) where the IRP manages the company’s assets and operations until a permanent plan is made.
Q3. What is the role of a Resolution Professional?
A Resolution Professional (RP) takes over from the IRP to manage the insolvency process, invite resolution plans, and work with creditors to revive or liquidate the company.
Q4. Who is eligible for IBC professional?
A person with 10 years of experience as a CA, CS, cost accountant, or advocate, or 15 years in management, who clears the Limited Insolvency Examination and is registered with IBBI, is eligible.
Q5. What does interim resolution mean?
Interim resolution refers to the temporary process under IBC where an Interim Resolution Professional (IRP) manages the debtor’s affairs until a Resolution Professional is appointed.
