Section 18 of IBC : Section 18: Duties Of Interim Resolution Professional

Explanation using Example

Imagine a company, ABC Corp, which has been facing financial difficulties and is unable to repay its debts. The creditors of ABC Corp file an application for initiating the Corporate Insolvency Resolution Process (CIRP) under the Insolvency and Bankruptcy Code, 2016. Once the application is accepted, an Interim Resolution Professional (IRP) is appointed.

The IRP begins his duties as per Section 18:

• He collects all necessary information about ABC Corp's assets, financials, and operations to understand its financial position, including details of business operations and financial transactions from the past two years.
• He makes a public announcement asking the creditors of ABC Corp to submit their claims. He receives various claims from secured and unsecured creditors, including banks and suppliers.
• He then constitutes a Committee of Creditors (CoC), which will comprise representatives of the creditors of ABC Corp.
• Until the CoC appoints a Resolution Professional, the IRP takes charge of managing ABC Corp's operations and protects its assets.
• He also compiles all the information and submits it to an information utility service, if required.
• The IRP takes control of ABC Corp's assets, which include a factory building, machinery, trademarks, and shares in a subsidiary. He ensures that these assets are safeguarded and not dissipated.

The IRP excludes certain assets from his purview, such as machinery that was leased from another company and is in ABC Corp's possession under a lease agreement, as well as assets of foreign subsidiaries.

This process ensures that there is a systematic approach to addressing the insolvency situation, protecting the interests of all stakeholders, and attempting to revive the company or liquidate its assets in a fair manner.