Insolvency Professional:
As per regulation 5 of Insolvency and Bankruptcy Code 2017 summary, an insolvency professional cannot be a person who is in anyway related to corporate involved in the case and cannot be appointed by the corporate person unless he is eligible as per Regulation 6 Further, the remuneration to be paid to liquidator is part of liquidation cost as per Regulation 7.
To be eligible as an insolvency professional, as per sub-regulation 6 of Insolvency and Bankruptcy Code, 2016, he/ she and every partner or director of that insolvency professional entity should be an independent of the corporate person. However, there is no requirement for the insolvency professionals to be an independent from the creditors. Moreover, as per Regulation (2) of Regulation 6 an insolvency professional is not eligible to be appointed as a liquidator if he or any of his entity as an insolvency professional is under a restraint order of the Insolvency and Bankruptcy Board of India (IBBI).
The independency of an Insolvency Professional is defined as below as per regulation 6(1) of Insolvency and Bankruptcy Code, 2016-
- If he is eligible to be appointed as an independent director in the board of corporate as per section 149 of Companies Act, 2013 (18 of 2013), where the corporate person is a company;
- If he is not related to any party associated with corporate person
- If he has never been an employee or proprietor or a partner of firm of auditors or company secretaries or cost auditor for the corporate person
- If he has never been an employee, or proprietor or partner of any legal firm or a consulting firm who have ever had a transaction exceeding ten percent of gross turnover of that firm, in at least past three years.
As per Regulation (3) of Regulation 6, the liquidator is bound to disclose to the Board and Registrar, the existence of any kind of relationship with corporate person or any of its stakeholders as soon as he becomes aware of it. Stakeholders are defined under regulation 2(1)(f) as a person or entity who is entitled to proceeds from sale of liquidation assets under section 53. As per Regulation (4) of regulation 6 of Insolvency and Bankruptcy Code, 2016, an insolvency professional seizes to be a liquidator if he or his related insolvency professional entity (director or partner) represents any other stakeholders in same liquidation.
Duties of Liquidator:
A liquidator is responsible to prepare and submit below reports as per regulation (1) of regulation 8 of Insolvency and Bankruptcy Code, 2016 rules-
- Preliminary Report
- Annual Status Report
- Minutes of consultations with stakeholders
- Final Report
As per Regulation 9 of Insolvency and Bankruptcy code 2016 rules, the liquidator needs to submit the Preliminary Report to corporate person within forty-five days of commencement of liquidation process with details including the capital structure of corporate person, the estimates of his assets and liabilities as on date of commencement of liquidation, whether if he wants to make any further inquiry about promotion, formation or failure of corporate person or conduct of his business thereof, and the proposed plan of action with timelines to carry out liquidation process.
As per Regulation (1) of Regulation 8 of Insolvency and Bankruptcy Code 2016 rules, the liquidator needs to make the minutes and share it with stakeholders in electronic or physical form when he receives an application in writing, or cost of making such reports and undertaking from stakeholders that he shall maintain confidentiality of these reports and will not make use of them to cause undue gain or undue loss to himself or another person.
