IRP POLICY
IRP Case Studies
Corporate Resolution Process Timeline
Potential Risk for IRP • The role of an Insolvency Practitioner (“IP”) has always been challenging – taking control of a company in crisis, making swift decisions based on limited information and balancing the competing interests of stakeholders; all of this requires sound judgment, often under extreme pressure. When things go wrong (or when parties feel they have lost out), IPs can become the focus of blame. •
IRP/RP can be held personally liable for their negligence from the perspective of an IP and could be held liable for their negligence while performing their fiduciary duties.
POTENTIAL RISKS
Our Understanding of IRP Responsibility / Work Role of IRP IRP/RP (Professional) • Taking over the control of the assets of the corporate debtor • Constitutes the Committee of Creditors • Various actions under section 28 are taken by the IP only with the prior approval of the CoC • Preparing the information memorandum • Examining the resolution plan
Acting CEO of Corporate Debtor • Management of the affairs of the corporate debtor • Management of the operations of the corporate debtor as a going concern
Risk Exposure
Sec 17. – Management of affairs of corporate debtor by interim resolution professional Sec 18 – Duties of interim resolution professional. Sec 25 – Duties of interim resolution professional Section 208 – Functions and obligations of insolvency professionals.
IRP Policy Process Committee of Creditors Professional Services
Financial Loss Claimed by the COC towards decision making in resolving IRP
Resolution Professional
Fiduciary in running the company as a Directors
D&O Insurance will cover for this particular risk
Company
Our Understanding of IRP Responsibility / Work
• IRP / Pseudo managers/Board by their virtue of they are coming on the board and the erstwhile board-members being replaced/terminated in most cases, they would require a D&O cover for covering their fiduciary duties as a director/management of the Board. • Acting as Insolvency Professionals to ensure that the company revives and they make a resolution plan within the time frame of usually 180 days, extendable up to 330 days, based on the concurrence with the CoC, they would also require an E&O cover.
Salient Features of Insurance Policy
The cover is aimed at ensuring that the insolvency professional (IP), who takes on the role of the firm's CEO at the behest of lenders, can take big decisions without fear of legal action.
Annual Policy / Policy for Tenure of IRP with an extended reporting Period of 7 years
Policy is a combination of D&O and Professional Indemnity Policy hence protects the IRP from risk of litigation due to Fiduciary Duty as well as Professional Services
Transaction Based Policy
Firm ( IRP Represents / Works delegates) can be added as Additional Insured
Endorsement available under the Policy
Emergency Cost Regulatory Crisis Response Cost Mitigation Cost Assets and Liberty Cost
Cover for Court Attendance Loss of Documents Cover
Professional Inquiry Cost
Investigation Expenses
Public Relation Costs
Liquidation When Liquidation is initiated • • • •
Insolvency Resolution period is unsuccessful Majority of COC voted for Liquidation NCLT decided to fast track the resolution procedure Insolvency Resolution Plan is not followed by Debtor
Duties of Liquidator • • • • • • • • • •
Consulting with the stakeholder Preparing Reports Maintenance of records and Books Money Recovery Preparing Asset Memorandum Asset Valuation & Realisation of Security Interest Selling the assets Distributing the profits among claimants Distributing unsold assets
Risk Exposure Risk Transfer Liquidator Insurance
Liquidator Insurance
Coverage
Policy Features
• It covers the legal liability arising out of any act, error or omission while providing the professional service
• Policy covers from date of an appointment of liquidator
• Professional Inquiry Costs
• It has extending reporting period of 5 years
• Loss of Document Cover • PR Consultant Cover
• It is annual policy • Insolvency Resolution Agency can be added in the policy
Thank You
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