Why directors should be wary of Insolvency and Bankruptcy Code

Under the IBC, appointment of a resolution professional marks the onset of insolvency resolution in a debtor company

Under the Insolvency and Bankruptcy Code (IBC), appointment of a resolution professional marks the onset of insolvency resolution in a debtor company. The powers of the board of directors of the company under duress stand suspended. This power is then vested and exercised in the professional, appointed by the National Company Law Tribunal.

However, this move does not absolve the directors from actions taken up to two years prior to the commencement of the resolution process. Often referred to as ‘twilight zone’ under insolvency terminology, this period of look back – of 12 months for regular transactions and 24 months