Saturday, 27 January 2018

KEY TIPS TO BECOME AN INSOLVENCY PROFESSIONAL

              
BY- KUNAL AHUJA
FROM VIVEKANANDA INSTITUTE OF PROFESSIONAL STUDIES


Who is an insolvency professional?


An insolvency professional is an individual appointed under insolvency and bankruptcy code, 2016 who has the authority to act with respect to a corporate debtor, insolvent individual or partnership in case of insolvency proceedings.


Insolvency professional is one of the key pillars of the insolvency and bankruptcy code who is vested with the power of taking charge over the entire management and business of the company undergoing insolvency proceedings. Insolvency professional is appointed by the insolvency professional agencies after obtaining the license from the insolvency and bankruptcy board of India, an insolvency professional is assigned with the functions of interim resolution professional/ final resolution professional provided under this act.


Functions of insolvency professional


There are multifold functions which are to be performed by the insolvency professional-
  • Rescue a business under insolvency 
  • Taking over the entire management of the company 
  • Managing the assets of the corporate debtor under its custody 
  • Taking care of multiple locations of registered office, diverse branches, and operating units 
  • Receive claims within 14 days of appointment 
  • Collation and verification of all the claims to be done within 7 days of receiving 
  • Prioritise the interest of financial and operational creditors 
  • Address the demands of various creditors 
  • Act as an intermediary between the corporate debtor/financial creditors and adjudicating authorities 
Along with the abovementioned functions, there are two major states in which insolvency professional plays essential roles i.e. in Resolution Process as a Resolution Professional and as a liquidator during the liquidation process.

Insolvency resolution

For viability of the credit market insolvency resolution is adopted which entails the maximization of the value of the assets of the corporate debtor and providing assurance to the stakeholders, financial and operational creditors.

Insolvency Professional appointed by the Insolvency Board of India is responsible for the due process of Insolvency Resolution. All the crucial functions of Resolution Professional constituting of-
  • Managing and leading the business of the corporate debtor 
  • Representing in the legal proceedings on behalf of the corporate debtor, whether under National Company Law Tribunal or any other adjudicating authority
  • Preparation of periodic reports for the NCLT and Committee of Creditors (COC)
  • Evaluation of the resolution proposals, identification of the resolution applicants 
  • Provide data rooms 
  • Process of due diligence 
  • Providing consultation to the committee of creditors to being a consensus for determining the vibrant resolution plan etc
If Insolvency Resolution, Fresh Start, Liquidation or Bankruptcy process has been initiated it will be the responsibility of the Insolvency Professional to take such necessary actions for the above-said proceedings, under section 208(1) of Insolvency and Bankruptcy code.

Obligations of Insolvency Professional



Under section 206 every Individual to perform the functions as Insolvency Professional has to get enrolled with the Insolvency Professional Agency and registered under the Insolvency and Bankruptcy Board of India.


As per section 208(2) of insolvency and bankruptcy code, 2016 every Insolvency Professional have to-


Take reasonable care and diligently follow his duties


Comply with all the terms mentioned in the bye-laws of Insolvency agency under which he is registered.


Allow the inspection of his records by his Insolvency agency anytime


Submit the copy of records, before the adjudicating authority, of every proceeding to the Insolvency and Bankruptcy Board of India as well as Insolvency Agency with which he is enrolled.


Carry out every function in such manner and subject to such conditions as may be specified


Punishment of Insolvency professional   


Under section 220 of code If an Insolvency Professional contravenes with any of the provisions or obligations under this code any of the following actions can’t be taken against him/her


Suspension or cancellation of registration


Imposition of penalty which may extend up to three times the amount of loss suffered by the person or three times the amount of unlawful gain to the Insolvency Professional


How to become an Insolvency professional?


To enroll as an Insolvency Professional an individual has to qualify the eligibility criteria set under insolvency and bankruptcy code, 2016.
Insolvency Professional must be of the age not less than 18 years of age i.e. should be a major
  • Insolvency Professional must be a Resident of India 
  • Insolvency professional must not have been convicted by any competent court of any offense involving moral turpitude or any offense punishable with imprisonment for a term exceeding six months, and a period of five years has not elapsed from the date of expiry of the punishment. 
  • No person who has been convicted of any offense and sentenced to imprisonment for a period of seven years or more is eligible to be enrolled as insolvency professional under IBC.
  • Any person who has been an undischarged insolvent or has applied to be adjudicated as an insolvent cannot be registered as insolvency professional. 
  • Insolvency professional must of sound mind. 
  • He shall be fit and proper for which he has to qualify following criteria 
  • He must be a person of Integrity.
  • He must hold good reputation and character. 
  • He must be competent 
  • He must be financially sound.
Procedure to become an Insolvency Professional


There are following ways to get enrolled as an Insolvency Professional provided the individual qualifies the eligibility criteria.


National Insolvency Examination

To become an Insolvency Professional an eligible individual can appear for national insolvency examination set by Insolvency Board of India. Any individual appearing for this examination does not necessarily require any prerequisite experience unless Insolvency Board of India officially announce.

Limited Insolvency Examination


An individual can become an Insolvency Professional by appearing for Limited Insolvency Examination only when that individual has 10 years experience as-


A Chartered Accountant registered under Institute of Chartered Accountants of India


A company secretary registered under Institute of Company Secretaries of India


Cost Accountant registered under Institute of Cost Accountants of India


An Advocate enrolled with Bar Council


Limited period registration


An individual can be appointed as an Insolvency professional for limited period or as interim Insolvency Professional if he/she has experience of 15 years as-


A Chartered Accountant registered under Institute of Chartered Accountants of India


A Company Secretary registered under the Institute of company secretaries of India


Cost accountant registered under Institute of Cost Accountants of India


An Advocate enrolled with Bar Council


Direct Registration


Any person who is a qualified Chartered Accountant, Company Secretary, Cost Accountant or Advocate has been in practice for not less than 15 years of a time period can apply for registration as an Insolvency Professional for a limited time period. The applicant has to submit the application fee of Rs. 5000 along with the application. And once the time period for which the Insolvency Professional was appointed expires, that individual cannot take any assignment as Insolvency professional.

Monday, 22 January 2018

INSOLVENCY AND PROFESSIONAL AGENCY



                  

       INSOLVENCY PROFESSIONAL AGENCY


                                                                                                  By- KUNAL AHUJA
                                                                                   From Veda Legal, Advocates & Solicitors 


What is an Insolvency professional agency?

Under section 3(20) of Insolvency and Bankruptcy Code, 2016 Insolvency Professional Agency is defined as a person who is registered with the Insolvency and Bankruptcy Board of India under section 201 of the code.An Insolvency professional agency is a company registered with Insolvency and Bankruptcy Board of India to perform various following functions-
  • Enroll Insolvency Professionals as it's a member if all the conditions set out in by laws laid down by the agency have been fulfilled on making the payment of the membership fees. 
  • Protect the interests and rights of all Insolvency Professionals enrolled with it. 
  • Enact standards of professional conduct to be observed by its members. 
  • Regulate and evaluate the performances of its members. 
  • Cancel or suspend the memberships of Insolvency Professionals upon the violation of any of the bye-law set by the Agency. 
  • Address the concerns of the consumers against the Insolvency Professionals enrolled as it's members. 
  • Come out with the list of members enrolled with it along with the evaluation of the performance of functions of the Agency. 
  • Publish such other information as specified by the board. 

According to section 199 of Insolvency and Bankruptcy code, 2016 no person is empowered to perform as Insolvency Professional Agency or issue the registration certificate to any insolvency professional as it's member unless the Insolvency Professional Agency has obtained the registration certificate for the Insolvency and Bankruptcy Board of India.

Sections 200 of the Act transcribes certain principles to be regarded by the Insolvency and Bankruptcy Board of India while granting registration to any Insolvency Professionals as the members of Agency-

  • Promote professional and ethical conduct of the Insolvency Professionals. 
  • Regulate and upgrade the professional development of insolvency professionals. 
  • Elevate the services of fit Insolvency Professionals to feed to the requirements of creditors, debtors and such other persons as may be specified. 
  • Provide protection to the interest of debtors, creditors, and such other persons as may be specified. 
  • Elevate the services of Insolvency professional agencies to provide efficacy in the Insolvency Resolution and Bankruptcy process under this code. 

Eligibility

Companies registered under section 8 of the companies act 2013 are entitled to registration as Insolvency Professional Agency only when following conditions are fulfilled-

According to section 205 of the code, the company should have written bye-laws and the standard structure for governance in accordance with the Insolvency and Bankruptcy Board of India regulations after obtaining the approval of the board.

The company has been instituted with the means to perform the functions of an Insolvency Professional Agency.
  • The company’s minimum net worth is ten crore rupees. 
  • The company has a paid-up share capital of five crore rupees. 
  • The company along with the directors, promoters, and members, having 10 percent of its share in the company, are fit and proper to function under this code. 
  • The company should not be under the control of any person residing outside India or any person who is a person residing outside India is not holding more than 49 percent of company’s share capital. 
  • The company should not be a subsidiary company established through more than one layer of a body corporate. 

Procedure of Registration

Section 201 of the code deals with the registration procedure of Insolvency Professional Agency which states that-

Each application for the registration shall be submitted to the Board in such form and manner, containing all the particulars as required to be stated along with the prescribed fees as specified under this code.
The application shall be made in form A of schedule of Insolvency and Bankruptcy Board of India regulations.


Following particulars must be submitted- 

  • The resolution stating that the director has the authority to file an application regarding same. 
  • Copy of Bye-laws of the company. 
  • Copies of memorandum and articles of association. 
  • If the applicant company is under the control of promoters or person holding more than 10 percent shares in the company then the application must consist of - 
  • Name, an address of registered office and principal place of business. 
  • Details of the person in control of the company. 
  • The statement stating that memorandum and articles of association along with the bye-laws is inconsistency with the Insolvency and Bankruptcy Board of India resolutions, 2016. 
  • Particulars of a board of directors of the applicant company. 
  • Bye-laws which are expressly mentioned, not the part of model bye-laws laid down by the Insolvency and Bankruptcy Board of India, should be numbered exclusively. 
  • Particulars of the person/persons possessing more than 10 percent of the share capital of the applicant. 
  • Specific detail of the infrastructure including the number of offices and IT computers and other computer facilities etc. 

Grant/Rejection of Registration of application-

  • The board shall acknowledge every application within 7 days of its receipt. 
  • If the board is satisfied that application meets all the requirements set under this code, the board shall grant the certificate of registration to the applicant. 
  • The board may grant the certificate of registration subjected to such terms and conditions as it may deem fit. 
  • The board if not satisfied with the application can reject the application only after providing the opportunity of being heard to the applicant. 
  • The order, whether granting or rejecting, the certification shall be communicated by the board within 15 days of the making of the order. 
  • Model bye-laws to be adopted by Insolvency Professional Agencies
  • Under section 196(2) of the code Insolvency and Bankruptcy Board of India has laid down certain model bye-laws which could be adopted by the Insolvency Professional Agencies-
  • Minimum level of professional competence required of the members of Insolvency Professional Agencies 
  • Benchmark for Professional and ethical conduct to be adopted by the members. 
  • Eligibility for enrollment as members. 
  • Criteria for granting the registration. 
  • Establishment of a regulatory body for internal regulation and management of the agency upon the terms set by the board. 
  • Specification of the groups or classes of persons to whom the agency shall provide its services at concessional prices or free of cost. 
  • Minimum details required to be filled by the person along with the form and time for submitting the form. 
  • Predetermine the grounds upon which penalties may be levied upon the members. 
  • Setting up a transparent mechanism to redress the grievances or complaints against the members of the agencies. 
  • A process to be adopted for enrollment of persons. 
  • Fix the number of fees and the way to collect the same. 
  • The manner for the administration of the examination for enrollment of members. 
  • Evaluation of the performance the members as well as insolvency professional agencies. 

Other obligations to be fulfilled by the members

  • The manner in which the proceedings shall take place against the members and imposition of penalties upon the members. 
  • Proper utilization of the amount submitted as a fine imposed upon the members. 
  • Insolvency professional Agencies can lay down certain additional bye-laws along with those part of model laws.