Meaning of Insolvency Professional
An Insolvency Professional is one who is registered with the Insolvency and Bankruptcy Board of India (IBBI). They are enrolled with an Insolvency Agency and they are involved in the dissolution process of an insolvent individual, companies, LLPs or partnerships. These professionals are authorised to act on behalf of such insolvent individual, companies etc. During the bankruptcy situation, the insolvency professionals play a vital role in liquidating the entity assets and other settlement processes. This process has gained momentum with the government bringing in strict norms through Insolvency and Bankruptcy Code.
Insolvency Professional Agency
Any agency registered with the IBBI u/s 201 of Insolvency Code, 2016 is referred as an insolvency professional agency. The key function of these agencies are to regulate the activities of insolvency professionals and ensure their development in the industry. These professional members are required to comply with the terms and conditions as specified in the bye-laws of the insolvency agency code. IBBI exercises control over Insolvency professional agency and its professionals with respect to the complaints made under section 217 of Insolvency Code.
Functions of an Insolvency Professional Agency
Following are the functions of Insolvency Professional Agency as specified in section 204 of Insolvency Code (with effect from 15-11-2016):
- Insolvency professional agency has the primary function of granting membership to insolvency professionals.
- These agencies frame the standard of professional conduct and ethics to the members enrolled under them.
- They protect the rights and privileges of the members and safeguard their interests
- They also enquire the member’s grievances and take steps to resolve those.
- The agency continuously monitors member’s performance and they can suspend/cancel membership wherever and whenever required.
Eligibility Criteria for Insolvency Professional
An individual is eligible to become an Insolvency Professional provided, he/she :
- Is an Indian resident and has attained 18 years of age (Majority).
- Is of sound mind and a fit person.
- Is solvent and has not been declared as an insolvent.
- Possess the required qualification and experience as specified by the IBBI.
- Has not been convicted by any competent court/law, for an offence punishable with imprisonment for a term exceeding six months, or for an offence involving moral turpitude, and a period of five years has not gone from the date of expiry of the sentence.
Qualification and Experience
As a first step, any applicant must get themselves registered with Insolvency Professional agency. Listed below are the required qualifications and experience for an applicant to be registered as an Insolvency Professional:
- They are either required to clear the National Insolvency Examination (or)
- Clear the Limited Insolvency Examination in which case the applicant should have 15 years of experience in management, after receiving a Bachelor’s degree from a university established or recognised by law (or)
- Has passed the Limited Insolvency Examination and has 10 years of experience as –
Once the above-listedtions are fulfilled, the applicant can start practicing as an Insolvency professional.
- A chartered accountant and is a member of the Institute of Chartered Accountants of India (or)
- A company secretary and is a member of the Institute of Company Secretaries of India (or)
- A cost accountant and is a member of the Institute of Cost Accountants of India (or)
- An advocate enrolled with a Bar Council
Functions of an Insolvency Professional
The primary function of an Insolvency Professional is to assess the financial position of the company, partnership, LLPs, individual etc and to ensure smooth process of its dissolution. These professionals, in certain possible cases look for opportunities to rescue businesses. Otherwise the main functions of an Insolvency Professional are:
- Analyse the financial statement of the company and understand the position.
- Make arrangements to sell all the assets of the liquidating Individual or company.
- Understand the receivables position of the company/Individual and look after the collection process.
- Conduct formal discussions with debtors/creditors and manage their settlement process.
- Check and agree on the creditors’ claims as per the available funds. This is one of the main duties of Insolvency professionals.
- Involve in the fund distribution process after setting aside money required to pay the cost of liquidation.
- Deal with the other competing interest, if any.
- Insolvency professionals are required to prepare and submit report to the National Company Law Tribunal with respect to the following:
- Liquidation plan and process: This has to be submitted within 75 days of commencement of the process by the insolvency professional.
- Detailed report on the asset memorandum.
- Interim report on how the liquidation process is progressing from time to time.
- Details about the sale of all the assets.
- Discussion with the Debtors and Creditors and the conclusions arrived.
- Final report prior to the dissolution of the company, partnership and others.