You’ve probably heard about terms such as insolvency, bankruptcy, and liquidation. But do you know who are the experts that make these complex processes work and make sure that there a resolution to these difficult situations? Enter the ‘Insolvency Professionals’ – licensed professionals who are experts at resolving complex debt situations, including insolvency, bankruptcy, and liquidation.
The scope of an Insolvency Professional ranges a wide gamut of services, ranging from acting as an officer of the court for bringing all the lenders together, to running the course of resolution proceedings as mandated under law.
The ultimate objective is to manage the affairs of the insolvent company and to ensure that it is running as a going concern i.e., maintaining continued operations to make it viable for any investor to infuse funds and bring the company back to its feet. This ensures that there is some certainty for the lenders to get back their outstanding loans and make sure that any suspicious transaction done by borrower is ploughed back for the benefits of the lender.
An Insolvency Professional is enrolled with the Insolvency Professional Agency, also called an IPA, and registered with Insolvency Bankruptcy Board of India (IBBI). Basically, it means that an Insolvency Professional operates within the radar of the regulatory bodies and their actions are monitored by them, making it safe for lenders and borrowers to engage with them for advisory services.
Insolvency Professionals are required to strictly abide by the law and conduct professionally to provide solution to both the lenders and borrowers. In fact, only court can appoint Insolvency Professional as proposed by the lenders or the borrower after making sure that Insolvency Professional has no history of misconduct and is in good standing regarding their compliances. Therefore, the lenders and the borrowers get their due diligence done on Insolvency Professional by the regulatory bodies itself and later get a stamp of approval by the court.
Hence with such level of transparency and further authentication by regulatory bodies & the court, Insolvency Professional can be a great choice to approach for getting consultation on restructuring of debt and with vast experience of Insolvency Professional, the lenders and borrower can also avoid the hassle of going to the court, if amicable resolution is arrived before approaching the court.
Hopefully by now you are convinced that approaching an Insolvency Professional is best possible way to restructure and get resolution for your debt.
This can be achieved either through route of court, i.e., via the mechanism mentioned in the Insolvency and Bankruptcy Code 2016, in which the insolvency matters are concluded in a time-bound manner within a period of 6 months. Alternatively, an Insolvency Professional can also help the parties arrive at an amicable resolution between by proposing a restructuring or settlement plan, without having to go to court.
One of the ways to find the Insolvency Professional is to surf through the website of the Insolvency & Bankruptcy Board of India i.e., the regulatory body of the Insolvency Professional and you can find the registered Insolvency Professional. As of the time of this writing, there are 4158 registered Insolvency Professionals in India, now the herculean task is scouting through this list or obtaining references and finding suitable the Insolvency Professional.
It is indeed a very time-consuming task, and you would want to make sure that you are engaging a person with the right experience and background who understands your industry and has the right prior experience in running Insolvency and bankruptcy matters. You would also want to make sure that the IP has a valid Authorization for Assignment (AFA) and has no disciplinary proceedings against them.
Alternatively, you can approach insolvency consulting firms such as Ancoraa Resolution that have a vast network of licensed IP associates across the country. These professional services firms help the lenders and borrowers to save time and get the right Insolvency Professional engaged for tailored advice depending on their situation. You thus have the benefit of engaging an Insolvency Professional having single or multiple sector/industry specific rich experience in turnaround and restructuring of debt.
The Insolvency Professional, when appointed by the court, specifically for a corporate entity to resolve a debt matter, will immediately take over the management of that corporate entity. This means that a company which is unable to pay debt of its lenders have their existing owners and management lose their power to control the said corporate entity. Therefore, a person with no conflict of interest and independent of all the stakeholders will be running the corporate entity, which in this situation is an Insolvency Professional.
The first thing an Insolvency Professional does is to immediately take custody and control of the ailing corporate entity and make sure that it is free from the influence of the old management and ownership. Thereafter, the IP will bring all the lenders together to take the process of resolution of debt further and run the prescribed course of resolution and help the lenders recover their dues in an efficient and time bound manner.
The Insolvency Professional manages the affairs of the corporate entity with the powers of owners of the corporate entity vested with him/her, but the catch here is that the powers are not absolute, rather they are subject to the decisions of lenders of the corporate entity. The IP must work in tandem with the lenders when it comes to deciding the course of business of the corporate entity. Also, with great powers comes great responsibilities, the Insolvency Professional must make sure that he/she has all the resources required to manage the affairs of the corporate entity i.e., appointing various other independent professionals ranging from qualified chartered accountants, lawyers, valuers, and other professionals as required.
It is common, and infact efficient for an IP to have the right support staff engaged to take on the business of running the proceedings of a corporate insolvency process. A time-bound solution is necessary to ensure that the assets of the corporate entity will not keep on depreciating and that the enterprise value of the corporate entity is not eroded with passage of time.
Insolvency Professionals collate all the data of the corporate entity ranging from its business, ongoing cases, and the list of lenders with their debt amount, bifurcating them into secured and unsecured debt and subsequently share it with lenders. Another important task undertaken by the Insolvency Professional is to present the company facts and data to potential investors to get best value for the lenders. The objective is to obtain the maximum value for the enterprise for the benefit of the lenders.
Thereafter the Insolvency Professional must ensure that the corporate entity is kept running and the operations do not come to a standstill. The Insolvency Professional ensures that the scale of operations is improved, and the company is taking sound business decisions in the best interest of the lenders.
This ensures not only the survival of the business but also increases the likelihood of lenders getting their dues back with minimal or no haircuts. Also, the Insolvency Professional will ensure that, no enforcement actions are taken by any authorities or stakeholders to sell the assets of the corporate entity or drag the corporate entity to any court of law for payment of debt.
By now you would appreciate the multi-faceted role that an Insolvency Professional plays in managing a difficult situation like insolvency and bankruptcy by acting as the mediator between the lender and the borrower. Therefore, an independent person exhibiting integrity and vast experience in restructuring and resolution of debt is the right resource in value preservation of all stakeholders involved.
The role of an Insolvency Professional is therefore also vital for the improvement of economic condition of the country by making sure that lenders have confidence in extending credit to enterprises for economic growth and prosperity.