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:
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.
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.
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:
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:
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 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:
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.