Meaning of Insolvency Professional
An Insolvency Professional is one who is registered with the Insolvency and Bankruptcy Board of India (IBBI). They are enrolled with an Insolvency Agency and they are involved in the dissolution process of an insolvent individual, companies, LLPs or partnerships. These professionals are authorised to act on behalf of such insolvent individual, companies etc. During the bankruptcy situation, the insolvency professionals play a vital role in liquidating the entity assets and other settlement processes. This process has gained momentum with the government bringing in strict norms through Insolvency and Bankruptcy Code.
Insolvency Professional Agency
Any agency registered with the IBBI u/s 201 of Insolvency Code, 2016 is referred as an insolvency professional agency. The key function of these agencies are to regulate the activities of insolvency professionals and ensure their development in the industry. These professional members are required to comply with the terms and conditions as specified in the bye-laws of the insolvency agency code. IBBI exercises control over Insolvency professional agency and its professionals with respect to the complaints made under section 217 of Insolvency Code.
Insolvency And Bankruptcy Board of India (IBBI)
The Insolvency and Bankruptcy Board of India was established on 1st October, 2016 under the Insolvency and Bankruptcy Code, 2016 (Code). It is a key pillar of the ecosystem responsible for the implementation of the Code that consolidates and amends the laws relating to reorganization and insolvency resolution of corporate persons, partnership firms and individuals in a time-bound manner for maximization of the value of assets of such persons, to promote entrepreneurship, availability of credit and balance the interests of all the stakeholders.
It regulates a profession as well as processes. It has regulatory oversight over the Insolvency Professionals, Insolvency Professional Agencies, Insolvency Professional Entities and Information Utilities. It writes and enforces rules for processes, namely, corporate insolvency resolution, corporate liquidation, individual insolvency resolution and individual bankruptcy under the Code. It has recently been tasked to promote the development of, and regulate, the working and practices of, insolvency professionals, insolvency professional agencies and information utilities and other institutions, in furtherance of the purposes of the Code.
Eligibility Criteria for Insolvency Professional
An individual is eligible to become an Insolvency Professional provided, he/she :
Is an Indian resident and has attained 18 years of age (Majority).
Is of sound mind and a fit person.
Is solvent and has not been declared as an insolvent.
Possess the required qualification and experience as specified by the IBBI.
Has not been convicted by any competent court/law, for an offence punishable with imprisonment for a term exceeding six months, or for an offence involving moral turpitude, and a period of five years has not gone from the date of expiry of the sentence.
Qualification and Experience
They are either required to clear the National Insolvency Examination (or)
Clear the Limited Insolvency Examination in which case the applicant should have 15 years of experience in management, after receiving a Bachelor’s degree from a university established or recognised by law (or)
Has passed the Limited Insolvency Examination and has 10 years of experience as :
-A chartered accountant and is a member of the Institute of Chartered
Accountants of India (or)
-A company secretary and is a member of the Institute of Company Secretaries
-of India (or)
-A cost accountant and is a member of the Institute of Cost Accountants of India
(or)
-An advocate enrolled with a Bar Council .
Once above fulfilled, the applicant can start practising as an Insolvency professional.
Functions of an Insolvency Professional
The primary function of an Insolvency Professional is to assess the financial position of the Company, Partnership, LLPs, Individual etc and to ensure the smooth process of its dissolution. These professionals, in certain possible cases, look for opportunities to rescue businesses. Otherwise, the main functions of an Insolvency Professional are:
Analyse the financial statement of the company and understand the position.
Make arrangements to sell all the assets of the liquidating Individual or company.
Conduct formal discussions with debtors/creditors and manage their settlement process.
Understand the receivables position of the company/Individual and look after the collection process.
Check and agree on the creditors’ claims as per the available funds. This is one of the main duties of Insolvency professionals.
Involve in the fund distribution process after setting aside money required to pay the cost of liquidation.
Deal with the other interests, etc..
Insolvency professionals are required to prepare and submit report to the National Company Law Tribunal with respect to the following:
•Liquidation plan and process.
•Detailed report on the asset memorandum.
•Interim report on how the liquidation process is progressing from time to time.
•Details about the sale of all the assets.
•Discussion with the Debtors and Creditors and the conclusions arrived.
•Final report prior to the dissolution of the company, partnership and others.
CHALLENGES FOR INSOLVENCY PROFESSIONALS
•Timeliness – The duties entrusted on an IRP that are to be completed within 30 days is a difficult task especially with regards to the compilation of claims.
•Number of creditors – The number of operational creditors is in large number which in turn makes verification of claims a difficult task.
•Relevant fee – it is difficult on part of Interim insolvency professional to ascertain the appropriate fee for their rendered service. what criteria should actually be taken into consideration while calculating the fee is an area of concern?
•Appointment of professional for assistance – depending upon the size of work involved, interim resolution professional do need to hire professionals for their assistance. What shall be the fee for the same, how many professionals maximum can be appointed or whether any bar should be imposed on the maximum fee that can be paid to the professionals for assistance.
Cooperation from staff - companies which are a going concern are not really willing to share the information required by the IRP
Compiled by CA Sunil Sakral
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