Introduction

Business distress is no longer an uncommon phenomenon. Market volatility, regulatory changes, credit constraints, operational mismanagement, and economic downturns can push even established companies into financial stress. In such situations, structured and time-bound resolution becomes essential — not only to protect creditors but also to preserve enterprise value.

The Insolvency and Bankruptcy framework in India provides that structure. At the heart of this system stands the Insolvency Professional (IP).

An Insolvency Professional plays a decisive role in corporate insolvency resolution, liquidation, and individual bankruptcy processes under Indian law. Their function is not merely administrative — it is fiduciary, regulatory, and strategic.

This article explains:

• Who is an Insolvency Professional

• Legal framework governing the profession

• How to become an Insolvency Professional

• Functions and responsibilities under IBC

• Importance of professional guidance in insolvency matters

Legal Framework – Insolvency and Bankruptcy Code, 2016

The insolvency regime in India is governed by the Insolvency and Bankruptcy Code, 2016 (IBC).

The IBC consolidated and amended various laws relating to:

• Corporate insolvency

• Partnership insolvency

• Individual bankruptcy

• Liquidation process

The regulatory authority overseeing Insolvency Professionals is the Insolvency and Bankruptcy Board of India (IBBI).

IBBI:

• Registers Insolvency Professionals

• Frames regulations

• Conducts disciplinary proceedings

• Monitors compliance

The Code mandates that insolvency processes must be conducted only through a registered Insolvency Professional.

Who is an Insolvency Professional?

An Insolvency Professional (IP) is a licensed individual authorised to:

• Conduct Corporate Insolvency Resolution Process (CIRP)

• Act as Interim Resolution Professional (IRP)

• Act as Resolution Professional (RP)

• Conduct liquidation proceedings

• Serve as Bankruptcy Trustee in individual insolvency

The IP takes control of the affairs of the corporate debtor during insolvency and acts as an officer of the court (NCLT).

How to Become an Insolvency Professional?

The pathway to becoming an IP involves structured qualification and regulatory approval.

Eligibility

Typically eligible professionals include:

• Chartered Accountants

• Company Secretaries

• Cost Accountants

• Advocates

• Professionals with managerial experience (subject to criteria)

Steps to Registration

1. Clear the Limited Insolvency Examination conducted under IBBI regulations.

2. Enroll with an Insolvency Professional Agency (IPA).

3. Apply for registration with IBBI.

4. Obtain certificate of registration as Insolvency Professional.

The process ensures that only qualified and competent professionals handle insolvency matters.

Role of Insolvency Professional in Corporate Insolvency Resolution Process (CIRP)

Once a petition is admitted by the National Company Law Tribunal (NCLT), an Insolvency Professional is appointed.

1. Interim Resolution Professional (IRP)

The IRP:

• Takes control of the management of the corporate debtor

• Makes public announcement of insolvency

• Invites claims from creditors

• Constitutes the Committee of Creditors (CoC)

The Board of Directors stands suspended during this period.

2. Resolution Professional (RP)

After confirmation by CoC, the RP:

• Manages the company as a going concern

• Prepares Information Memorandum

• Invites Resolution Plans

• Conducts meetings of Committee of Creditors

• Places approved plan before NCLT

The RP ensures that the process is completed within statutory timelines.

Functions of an Insolvency Professional

An Insolvency Professional performs several critical functions:

A. Custodian of Assets

The IP:

• Takes control of bank accounts

• Secures physical assets

• Protects intellectual property

• Prevents asset siphoning

B. Claims Verification

The IP:

• Verifies financial and operational creditor claims

• Determines voting share in CoC

• Ensures fairness and transparency

C. Regulatory Compliance

The IP must comply with:

• IBBI regulations

• NCLT directions

• Disclosure requirements

• Ethical standards

D. Facilitator of Resolution

The IP:

• Engages with potential resolution applicants

• Evaluates resolution plans

• Ensures compliance with Section 30 of IBC

• Submits compliant plan to NCLT

E. Liquidator (if resolution fails)

If no resolution plan is approved, the IP may act as Liquidator:

• Realises assets

• Distributes proceeds as per waterfall mechanism

• Files dissolution application

Importance of Insolvency Professional in Value Preservation

Insolvency is not merely about liquidation. The objective of IBC is:

• Maximisation of asset value

• Revival of viable businesses

• Time-bound resolution

• Balance of stakeholder interests

An experienced Insolvency Professional can:

• Stabilise distressed operations

• Prevent further value erosion

• Facilitate credible investor participation

• Ensure lawful conduct of proceedings

Poorly managed insolvency proceedings can significantly reduce recovery for creditors and destroy enterprise value.

Role of Professional Advisors in Insolvency Matters

While the Insolvency Professional is appointed by the Tribunal, stakeholders often require independent legal advisory support.

At JV & Associates, insolvency advisory typically includes:

• Advising financial creditors on filing Section 7 applications

• Advising operational creditors under Section 9

• Representing corporate debtors

• Drafting replies and objections

• Advising on settlement and restructuring options

• Assisting in resolution plan evaluation

• Strategic advisory during CIRP

Insolvency proceedings involve high financial stakes. Early legal intervention can significantly alter outcomes.

Insolvency in Kerala – Practical Considerations

For companies operating in Kerala:

• Proceedings are filed before the Kochi Bench of NCLT.

• Financial institutions increasingly invoke IBC for recovery.

• MSMEs face operational stress due to credit and market issues.

Strategic guidance becomes crucial in:

• Pre-insolvency negotiation

• One-time settlement discussions

• Defence against admission

• Resolution plan participation

A structured approach helps businesses navigate insolvency with clarity.

Frequently Asked Questions (FAQ)

Can directors continue during CIRP?

No. Upon appointment of IRP, the Board’s powers are suspended and vest in the IRP/RP.

Can insolvency proceedings be withdrawn?

Yes. With approval of 90% voting share of Committee of Creditors, applications may be withdrawn under Section 12A of IBC.

What is the timeline for CIRP?

The standard timeline is 180 days, extendable to 330 days including litigation period.

Is insolvency always liquidation?

No. The primary objective is resolution and revival. Liquidation is the last resort.

Ethical and Regulatory Oversight

Insolvency Professionals are bound by:

• Code of Conduct under IBBI regulations

• Disclosure obligations

• Conflict-of-interest restrictions

• Disciplinary oversight

This ensures accountability and transparency in insolvency administration.

Conclusion

The Insolvency Professional plays a central and statutory role in India’s insolvency framework. Entrusted with control over distressed enterprises, the IP must balance legal compliance, stakeholder interests, and value maximisation.

For creditors, debtors, and investors, insolvency proceedings require careful legal navigation. Structured advisory support can protect commercial interests while ensuring compliance with the Insolvency and Bankruptcy Code.