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The Covid-19 pandemic has majorly affected the economy, businesses, lives and livelihoods of people in some or the other way. In fact, there has been a major impact on the businesses of all sizes, and unfortunately, a few of them even had to shut their operations and liquidate their companies. However, the Insolvency and Bankruptcy Code protects the rights and obligations of the businesses that have become insolvent or are facing bankruptcy. The Insolvency And Bankruptcy Code 2021 was declared to amend the Insolvency and Bankruptcy Code, 2016. This act was amended for the companies or businesses that have become insolvent or are incapable of repaying their remaining debt.  The IBC provides a time-bound procedure to resolve bankruptcy and insolvency. The insolvency professionals are skilled experts working for an insolvency professional agency hired by companies or organizations to carry out the entire process smoothly. These qualified and trained insolvency accountants or professionals carry out the entire CIRP (corporate insolvency resolution process) while protecting the rights of the faulty debtors. The CIRP provides 330 days to resolve Insolvency by legal laws and methods. Therefore, to understand the CIRP and the role of insolvency professionals better, you must learn about the two types of insolvencies that are as follows:

1. Cash-flow Insolvency 

This type of Insolvency occurs when the business or the firm is out of liquid cash to repay the debt but has enough assets that can be sold or liquified to repay the debt. Cash flow insolvency stands for lack of liquid assets or cash in hand to fulfil the loan obligations.

Here the insolvency professionals can present all the company's assets and suggest it to sell the assets in return for cash that can be used to repay the debt.  The insolvency accountants can also negotiate and buy some time for the firm to do so.

2. Balance-sheet Insolvency 

In this type of Insolvency, the chances of the bankruptcy proceedings being filed are high since the company or the business is short on both cash and assets. Thus, when the firm or business does not have any assets to pay back a loan taken from the creditors, then it is called balance-sheet Insolvency.

Functions of an Insolvency Professional Agency 

The insolvency professional agency provides the organizations to protect themselves in case of a bankruptcy or an insolvency situation. These agencies have experts known as insolvency accountants or professionals who manage, advise, and help the firms with the proceedings of the IBC. Under section 204 of the Insolvency Code, an insolvency professional agency can perform the following:

1. The primary function of the insolvency agency is to give membership to insolvency professionals.
2. They form and structure the guidelines of professional conduct and ethics for the members registered under them.
3. These agencies are responsible for protecting the rights and privileges of their members and defending their interests.
4. The insolvency agencies also find out about all the grievances and obstacles of their members and then take the required steps to resolve them.
5. The agency constantly observes and checks the performance of all the insolvency professionals under it.  And they can suspend/cancel their membership if and when required.

Key Role of Insolvency Professionals In Corporate Insolvency Resolution Process 

The insolvency professionals assess and scrutinize the company's financial condition by recording and counting all its assets and liabilities to initiate the dissolution process smoothly and correctly. In addition, these individuals are qualified and trained to look for opportunities and ways to rescue businesses and organizations. Apart from that, the following are the main functions of the insolvency professionals:

1. Analyze all the documents and the financial statement of the company to evaluate and understand its monetary position.
2. Make all and necessary preparations to initiate the sale of all the assets of the bankrupting Individual or company.
3. Estimate and comprehend the receivable status of the company or business and take care of the entire collection process.
4. Organize and initiate formal discussions for negotiations with debtors or creditors and oversee their settlement process.
5. One of the main duties of the insolvency professionals is to verify and agree on the claims made by the creditors according to the existing assets and funds.
6. The Insolvency professionals also get involved in the fund distribution process after setting aside the money required to pay the liquidation cost.
7. The insolvency accountants or professionals deal with the other competing concern, if any.

Apart from that, it is the Insolvency professionals’ job and responsibility to compile and submit a report to the National Company Law Tribunal concerning the following:

• The Insolvency professionals have to submit a report for the liquidation plan and process within 75 days of commencement of the process.
• A comprehensive asset memorandum report is to be made and submitted.
• An interim report on how the liquidation process is proceeding every now and then.
• The minutest of the details about the sale of the firm or company assets for debt repayment.
• The insolvency professionals must document all the discussions with the debtors and creditors along with the established conclusions.
• A final report before the dissolution of the company, businesses, and others.

Qualification of the Insolvency Professionals or accountants 

The first step and the basic eligibility criteria for an individual to become an insolvency professional is to get themselves registered with a reputed corporate consulting agency like TRC Corporate Consulting or an insolvency professional agency. In order to get registered, an individual must have the following qualifications and experience:

1. They are required to either pass and clear the National Insolvency Examination (or)
2. They are required to have qualified and passed the Limited Insolvency Examination, in which case the applicant should have experience in management for 15 years after completing their bachelor’s course from a university established or recognized by law (or)
3. They should have successfully passed the Limited Insolvency Examination and have experience of ten years as:

• A Chartered Accountant (CA) and is a representative of the Institute of Chartered Accountants of India (or)
• The Company Secretary and is also a member of the Institute of Company Secretaries of India (or)
• A cost accountant plus a member of the Institute of Cost Accountants of India (or)
• An enrolled advocate with a Bar Council

With a board of more than 15 IBBI registered insolvency professionals operating at a PAN India level, TRC Corporate Consulting services provide businesses with in-house expertise for facing all significant activities related to the Liquidation and Insolvency process. These include everything from compliances, transactions, operations, regulation and solutions. Contact us now to benefit from our services that are inspired by our experienced and skilled team.