15 Dec 2021 Ankit Chadha

Corporate Insolvency Resolution Process: Know the Significance and Role of An Insolvency Professional

Insolvency Professionals | TRC Corporate Consulting

The list of industries, lives, livelihoods, and businesses affected by the Covid-19 is long. Many people lost their loved ones and their livelihoods during the first and the second wave. Just like how people of all age groups had to face a direct or indirect effect of the virus, businesses of all sizes had to bear some of the other impacts of this pandemic. Some organizations had to struggle with heavy losses, while some had to shut down and liquidate all their assets. Thus, it is essential for such companies to learn about the Insolvency and Bankruptcy Code that protects the rights and claims of the organizations that have become insolvent or are facing bankruptcy. You can hire insolvency professionals by partnering with a top consultancy firm like ours to get the entire process executed with utmost efficiency.

The Insolvency And Bankruptcy Code 2021 was implemented to revise the Insolvency and Bankruptcy Code, 2016. This act was passed in order to safeguard the rights of the companies that have to or want to liquidate their assets due to lack of revenue, inability to repay debt, or any other reason.

With the help and assistance of the skilled insolvency professionals that work for Insolvency professional agencies, you can carry out the entire process worry-free. These qualified and expert insolvency professionals or insolvency practitioners execute the entire corporate insolvency resolution process while protecting the benefits of the faulty debtors. The corporate insolvency resolution process gives 330 days’ time to settle insolvency by legal laws and procedures. Therefore, to understand the corporate insolvency resolution process and the role of insolvency professionals better, you must learn about the two types of insolvencies that are as follows:

  • Commercial Insolvency: when the business runs out of liquid cash to repay the debt but has sufficient assets that can be traded or liquified to repay the debt. Also known as Cash flow insolvency, this type of insolvency refers to the lack of liquid cash in hand to fulfil the loan amount. It is the insolvency professional’s duty to present all the company assets that can be sold in exchange for cash that can be utilized to repay the creditors.  The insolvency practitioner can also reach a deal and buy some additional time for the company to carry out the required arrangements.
  • Balance-sheet insolvency, When this type of insolvency occurs, the company is short on both cash and assets. Thus, it is called balance-sheet insolvency when the organization does not have assets or money to pay back the creditors.

 

Roles And Responsibilities Of Insolvency Professionals?

Insolvency practitioners or Insolvency accountants are qualified experts who support organizations and entities who become insolvent or are under substantial financial burden. These consultants work with the managers of the companies, debtors, etc., and advise how to go about the insolvency procedures.

Apart from participating in the liquidation process, Insolvency practitioners or professionals also participate as administrators, supervisors, or nominees in bankruptcy for the Insolvency Bankruptcy Code proceedings.

To initiate the dissolution process, the insolvency professionals evaluate and scrutinize the company’s financial situation while documenting and counting its assets and liabilities. In addition, these individuals are trained to figure out ways to rescue businesses from getting dissolved along with:                        

  1. Conducting investigations for all the financial documents and statements of the company to pinpoint its monetary position accurately.
  2. Making mandatory preparations and arrangements to initiate the sale of all the bankrupt company’s assets.
  3. Estimating and predicting the receivable condition of the business and taking care of the entire collection process.
  4. Coordinating and initiating formal discussions for negotiations with debtors or creditors and overseeing the settlement process.
  5. One of the main duties of the insolvency professionals is validating and agreeing upon the claims made by the creditors considering the existing assets and cash.
  6. The Insolvency professionals also get involved in the fund allocation process after setting aside the liquidation costs.
  7. Dealing with the other challenging issues that occur during the process.

 

Qualification of the Insolvency Professionals or accountants 

The most important eligibility criteria for an individual to become an insolvency professional is to be registered under a reputed corporate consulting agency like TRC Corporate Consulting or a professional insolvency agency. And in order to get registered they must:

  1. Either qualify and clear the National Insolvency Examination (or)
  2. They need to have cleared and passed the Limited Insolvency Examination, in which case the applicant should have prior experience of working in management for 15 years after finishing their bachelor’s degree from a university established or recognized by law (or)
  3. They must successfully pass the Limited Insolvency Examination and have experience of ten years as:   
  • A Chartered Accountant (CA) and represent any Institute of Chartered Accountants of India (or)
  • The Company Secretary and along with that, a member of the Institute of Company Secretaries of India (or)
  • A cost accountant and a dignified member of the Institute of Cost Accountants of India (or)
  • An advocate enrolled with a Bar Council

Role of an Insolvency Professional Agency 

The insolvency agency provides the organizations with an insolvency professional who protects the rights and obligations of the organization dissolving. These insolvency professionals manage, counsel, and help the organizations with the proceedings of the IBC. Under section 204 of the Insolvency Code, a professional insolvency agency can perform the following:

  1. Give affiliation to insolvency professionals.
  2. Form and shape the professional conduct and standard guidelines for the members registered under them.
  3. Protect the rights and privileges of their members and safeguard their interests.
  4. Find out about all the grievances and barriers of their members and then resolve them.
  5. Observe and check the performance of the insolvency professionals under it, suspend/cancel their membership if and when required.

TRC Corporate Consulting has a panel of more than 15 IBBI registered insolvency professionals operating at a PAN India level. Our services provide businesses with in-house know-how for facing all activities associated with the Liquidation and Insolvency process. These include everything from compliances, transactions, operations, regulation, and results. Contact us now to leverage the services that our experienced and skilled team has to offer.