The insolvency regulator is considering a proposal to divest resolution professionals (RPs) of the role of running the distressed company’s day-to-day operations.
Under the proposed structure, RPs will be required only to handle insolvency-related procedures, manage compliance, coordinate with lenders and supervise the entire corporate insolvency resolution process (CIRP). A separate specialised entity will manage the operations of the company undergoing insolvency proceedings.
Initially, this bifurcation of roles may apply only to large corporate insolvencies where operational complexity and asset size demand professional management.
An official source told FE that the proposal, currently at an early discussion stage within the Insolvency and Bankruptcy Board of India (IBBI), could address what stakeholders have identified as a major drawback in the existing insolvency framework, where a single RP is expected to handle the resolution process and also function as the de facto CEO of a financially-distressed company.
“The proposal to split the RP’s role is intended to ensure the company continues as a going concern. Separating these responsibilities could allow each function to receive the required attention and expertise,” the official said.
Addressing the Skill Gap
Under the Insolvency and Bankruptcy Code (IBC), an RP takes over the management of an insolvent company after the insolvency process is admitted. Besides conducting the CIRP, the RP manages the company’s assets, keeps it as a going concern, coordinates with lenders and the adjudicating authority, engages potential bidders and complies with statutory timelines. However, it has long been argued that while RPs may have expertise in legal and procedural matters, they may not always possess the required skills to operate large businesses, especially over an extended period if the CIRP is delayed.
According to the official, the absence of sectoral expertise among RPs erodes enterprise value and reduces the likelihood of achieving a successful resolution.
“The reform should strengthen the resolution process while ensuring that the business continues to operate smoothly throughout the insolvency process,” said Vishwas Panjiar, managing partner at SVAS Business Advisors LLP.
Sourasubha Ghosh, partner at CMS INDUSLAW said splitting the RP’s role—one for the administrative process and one for interim management of the company – would bring greater transparency and ethical integrity. “This would allow industry-specific professionals to run the insolvent company without being entangled with the statutory administrative deliverables regarding stakeholder claims,” he said.
Global Best Practices
Experts noted that the proposal seems to follow the UK’s Insolvency Act, under which courts can appoint special managers to run highly complex businesses. This approach allows courts to preserve the value of a distressed company which can then attract serious bidders.
The proposal also aligns with the IBBI’s recent push towards sectoral specialisation. Under the panel management guidelines for the July-December 2026 period, insolvency professionals (IPs) must disclose the sectors (infrastructure, telecom, manufacturing, aviation) in which they have handled assignments, allowing tribunals to consider sector-specific experience when appointing RPs for insolvent entities.
