During liquidity, the assets are sold for managing finance, and the business comes to an end. In this stage, the secured creditors and unsecured creditors want to return the dividend and debt. The cash flow and the expenses of the business are not favourable to the business. The Insolvency and Bankruptcy Board of India is the authorized centre for insolvency professionals. These professionals take care of the dissolution process for partnerships, Companies, LLPs and individuals. If the professional or agency have registration of IBBI under section 201 of insolvency code, 2016, he or the agency can regulate the activity related to the insolvency process. The bye-laws framed by IBBI are regulated and implemented by insolvency professionals.
Chartered Accountants and Company secretaries with more than ten years of experience shall write the examination for insolvency professionals. Recently the IBBI has announced that professionals with ten years of experience in management, chartered accountancy, Cost accounting, Company secretary and law can transform themselves as insolvency professionals. The eligibility norms for hiring insolvency professionals revised from 2021. The new regulation breaks the old of having 15 years of experience. The national insolvency examination eligibility is passing the IBBI limited insolvency examination. This blog is worth reading for students pursuing Chartered accountancy course and Company secretary course. On the professional ladder, incisiveness and insightfulness take the professionals to greater heights.
Functions of Insolvency professional
- Insolvency professionals create the resolution plan with the transfer of assets and drawing obligations.
- An insolvency professional can be appointed by the order of the court or creditors.
- In the case of compulsory winding-up, the panel of professionals from the central government appoint the Insolvency professional. In the case of winding up because of inability, the liquidator must have special knowledge about the industry in which the Company operates.
- He or she shall be a Chartered accountant, Company Secretary, Cost and works accountant, and advocate. The operating agency can be a state-level institution, public financial institution and scheduled bank.
- With the help of the financial statements, the Insolvency professionals understand the financial process, accounting process and legal process of the Company.
- Help for the sale of the asset
- Help for the collection process from the debtors and creditors.
- Discuss with the debtors and creditors regarding the liquidation process.
- Agree with the claims of the creditors after checking the availability of the funds.
- He does calculations for the liquidation cost and distribution cost.
- Submit the liquidation plan within 75 days of the official announcement of liquidation.
- Prepare a report about memorandum information with asset details.
- Submit the interim report about the liquidation periodically during the liquidation process.
- Prepare the final report about the dissolution.
Global law for Insolvency and restructuring Companies
Restructuring and insolvency lawyers work as mediators between the creditors and the client. They settle the financial difficulties through re-structuring and help clients for smooth closure without facing insolvency. The insolvency laws followed in the US and UK are quite different. The theme of US law is debtor-in-possession. The theme behind the operations of UK law is creditors. In UK law, the interest of the secured or preferential creditor is given paramount importance. The liquidator must take charge of the functions to continue the business. If the administrator finds that it is not possible to continue the business, he can distribute the property to the creditors. Creditors are sometimes against the restructuring of business. Hence the managing director who represents the board of director take the ownership. The liquidation process first starts with the “resolution” and then focuses on the “liquidation”. The law in India is similar to that of the UK that emphasizes the “Creditors”. The US Bankruptcy Code works for the re-organization framework. In the US, the liquidator needs to submit the reports such as the details of the assets, financial operations with the debtors, and the details of the administration work. This help in the formulation of a resolution plan. The administrator needs to check the accounts and not the investigative duties.
The Singapore Companies Act and the restructuring and dissolution act 2018 have recently announced that the cash flow test is sufficient to prove that the Company is unable to meet its debts. Sun Electric Power Pte Ltd and RCMA Asia Pte Ltd appeared for a case regarding winding up proceedings. In this case, the court ordered that the balance sheet test should be the test to prove legally that the Company is insolvent.
In India, NCLT and NCLAT have stated that balance sheet acceptance leads to delay in the resolution. As the period of debt payment extend as per the balance sheet, the liquidation process gets delayed. Supreme Court of India brought this discussion to an end and stated that the balance sheet can be treated as evidence for finance and debts. The limitation act explains the period of limitation.
The legal and the finance process associated with the liquidation process shows that experienced executives wanted for this profession. According to the job portal reports, the average salary of insolvency professionals in India ranges from 2.5 lakhs to 6.6 lakhs. Chartered accountants, Company secretaries and cost accountants are suitable for learning this subject and become insolvency professionals.