Insolvency resolution is hired on an interim (temporary) basis in order to resolve the insolvency of the corporate debtor. To that end, there are several powers that an interim resolution professional can exercise. What are those powers, and responsibilities? Through this article, we are going to lift off the curtain of this topic.
Powers of a resolution professional
We have already stated; it is the Insolvency professional who is responsible for conducting the insolvency resolution process. Now, how he conducts this entire endeavor has an impact on what powers he can exercise. Let us see:
- Power to Control of the management affairs of the company: This statement can be easily misconstrued as actually be able to exercise voting rights within the company. While the fact is, the resolution professional has the rights to exercise control over the business relations of the company. This ability gives the IP the right to compel the directors of the company to do their bidding. This does not mean that the IP is actually managing the company; they are taking a part in the management. All the activities of the company responsible for generating profits for the company, the IP (Insolvency professional) controls.
- Power to dissolve the resolution: IP holds the ability to dissolve the powers of the directors or the partners of the company. When the company goes insolvent, its reins are passed to the resolution professional and the power of the board of directors or the partners is suspended. The key word here is “suspended”, not removed. The IP is merely taking the control from the directors, not removing them.
- Power to get reporting from the professionals: All the officers and management members of the insolvent company are to report to the insolvency resolution professionals. In doing so, these officers also give the IP access to the financial documents of the company that is required to aid in the insolvency resolution process.
- Power of institutions maintaining the accounts of the corporate debtor: It is the insolvency professional who financially instructs the institutions that are managing the financial accounts of the corporate debtor. The institutions must also provide all the information that the IP requires to resolve the insolvency.
These are the 4 major powers that the interim resolution professionals can exercise. As you can see, much of the powers are associated with granting the IP access to information, for the right information is the foundation upon which a proper resolution or liquidation plan is developed.