The Insolvency and Bankruptcy Code 2016 has been introduced with an objective to regularize the process of insolvency and bankruptcy of all persons including corporates, LLP's, partnerships & individuals. It aims to promote entrepreneurship and balance the interest of all stakeholders by amendment of laws related to reconstruction and insolvency resolution of various types of persons in a time bound manner. This code has led to advent of insolvency professionals where Chartered Accountants have an important role to perform.
Need of Insolvency Professionals in India
According to sources from World Bank Reports, in major developed economies such as US, UK & China, the number of years taken to resolve Insolvency cases are 1.5,1 & 1.7 respectively. However, time for insolvency process in India is 4.3 years. Insolvency and Bankruptcy code has a potential to bring disruptive changes to the Indian economy. Resolving of large number of cases related to insolvency and liquidation in a systematic time bound manner can have a significant impact on India's ease of doing business ratings. Though there is no clear picture of how many insolvency professionals India may require, but by having a look at the staggering number of cases pending in the courts, large number will be required and only insolvency professionals will be technically capable of handling these cases.
Role of an Insolvency Professional
An Insolvency professional performs a significant role in a corporate insolvency resolution process. He acts as a guardian of interest of all the stakeholders to ensure the debtor does not deceive the creditors of their rightful claims. Some of the key tasks performed by insolvency professional are preparation of resolution plan, valuation of the entity, realization of assets of the debtor, evaluation of the creditor's claims etc. Indeed the role of insolvency professional involves responsibility and prudence.
Functions of an Insolvency professional
The tasks of an insolvency professional begins when the insolvency resolution, bankruptcy proceedings or liquidation proceedings have been initiated .He shall take up tasks like to act as a resolution professional in an individual or a corporate insolvency resolution process, act as a bankruptcy trustee in bankruptcy proceedings or act as a liquidator in a liquidation process of a debtor. He shall involve himself in various activities like negotiating deals, advising on the viability of a business, possibility of a sound restructuring plan etc.
Process of Registration as Insolvency Professional
Following persons are eligible to be appointed as insolvency professional with an insolvency professional agency:
- An individual who has passed the National Insolvency Examination
- An individual who has passed the Limited Insolvency Examination & has 15 years of experience in management after he/she received a Bachelor's degree from a University recognized by Law.
- An individual who has passed the Limited Insolvency Examination and has 10 years of Experience as Chartered Accountant, Company Secretary , Cost Accountant or an Advocate.
The role of an insolvency professional in the Indian economy will be of paramount importance, especially in the current environment where the banking industry is sinking with ever increasing number of NPA's and cases of default of loans and debts. Insolvency professionals have a huge role to play in rescuing the banks from NPA's. Indeed this shall be a game changing reform of the Modi regime.
While the Insolvency and Bankruptcy Code has created a level playing field by providing opportunities to all professionals, it will be quite interesting to notice that financial and accountancy background is prominent among insolvency professionals. In United Kingdom, there are currently 1,735 licensed insolvency practitioners and majority of them are accountants.
Looking at the role, functions & responsibilities of an insolvency professional, it is indeed quite natural to realize that an insolvency professional requires capabilities not just from law perspective, but also from a financial perspective. We as Chartered Accountants have a role to play as an important cornerstone of the insolvency resolution process. Recently, Institute of Chartered Accountants of India (ICAI) has setup 'The Indian Institute of Insolvency Professionals of ICAI' (IIIPI). It is a Section 8 company formed as an insolvency professional agency for the members to enrol as insolvency professionals in accordance with Insolvency and Bankruptcy Code 2016. This unexplored area will definitely give Chartered Accountants a new professional horizon with tremendous opportunities in offering.
Tags Corporate Law