Ethical Considerations for Resolution Professionals under IBC
The Insolvency and Bankruptcy Code (IBC) 2016 entrusts Resolution Professionals (RPs) with significant responsibilities. To maintain the integrity and effectiveness of the insolvency resolution process, RPs must adhere to a stringent code of ethics. This module explores the key ethical considerations that guide an RP's conduct.
Core Ethical Principles
At the heart of an RP's ethical framework are several core principles. These are not merely guidelines but fundamental tenets that underpin their role and the trust placed in them by stakeholders.
Specific Ethical Challenges and Duties
Beyond the core principles, RPs face specific ethical challenges and have defined duties that require careful navigation.
To maintain strict confidentiality of all sensitive information accessed during the resolution process.
| Ethical Duty | Description | Potential Pitfall |
|---|---|---|
| Conflict of Interest | An RP must avoid situations where their personal interests could compromise their professional judgment. | Accepting gifts or favours from a party involved in the resolution process. |
| Duty to Report | RPs have a statutory duty to report certain matters to the Adjudicating Authority (NCLT) and the Insolvency and Bankruptcy Board of India (IBBI). | Failure to report fraudulent or preferential transactions. |
| Communication | RPs must communicate clearly, accurately, and in a timely manner with all stakeholders. | Providing misleading or incomplete information to creditors. |
| Professional Development | RPs must continuously update their knowledge and skills to remain competent. | Relying on outdated legal interpretations or practices. |
The ethical conduct of a Resolution Professional is not just about following rules; it's about upholding the trust and integrity of the entire insolvency framework.
Role of the IBBI
The Insolvency and Bankruptcy Board of India (IBBI) plays a crucial role in setting ethical standards and ensuring compliance. It issues regulations, guidelines, and codes of conduct that RPs must follow. The IBBI also has disciplinary powers to address ethical breaches.
The ethical framework for Resolution Professionals can be visualized as a multi-layered structure. The base layer consists of fundamental principles like integrity and impartiality. The next layer comprises specific duties such as confidentiality and competence. The top layer represents the oversight and enforcement mechanisms provided by the IBBI and the Adjudicating Authority. Each layer supports and reinforces the others, ensuring a robust ethical environment for insolvency proceedings.
Text-based content
Library pages focus on text content
Consequences of Ethical Lapses
Ethical lapses by an RP can have severe consequences, including disciplinary action by the IBBI, penalties, removal from the panel of RPs, and potential legal liabilities. These consequences underscore the importance of unwavering ethical commitment.
Learning Resources
Official regulations from IBBI detailing the code of conduct for Insolvency Professionals, including ethical obligations.
A webinar recording from IBBI discussing the ethical framework and its importance for insolvency professionals.
An article providing insights into the multifaceted role and responsibilities of RPs, touching upon ethical considerations.
A comprehensive overview of the IBC, which implicitly covers the ethical underpinnings of the roles it defines.
A discussion paper that often delves into operational and ethical aspects of the CIRP, offering perspectives on RP conduct.
The primary legal text of the IBC, which contains provisions that indirectly mandate ethical conduct and duties.
An article from an insolvency association discussing common ethical dilemmas faced by professionals and how to navigate them.
A detailed explanation of the RP's role, including their duties and the ethical standards they are expected to uphold.
Provides background on the IBBI, its mandate, and its role in regulating insolvency professionals and processes.
Focuses on a critical ethical challenge for RPs: identifying and managing conflicts of interest effectively.