CMA Ramlakhan Ahirwar

India currently ranks 136 out of 189 countries in the World Bank’s index on the ease of resolving insolvencies. India’s weak insolvency regime, its significant inefficiencies and systematic abuse are some of the reasons for the distressed state of credit markets in India today. There are multiple overlapping laws and adjudicating forums dealing with financial failure and insolvency of companies and individuals in India. The current legal and institutional framework does not aid lenders in effective and timely recovery or restructuring of defaulted assets and causes undue strain on the Indian credit system.

Under this backdrop, both the Houses of Parliament have now passed the much needed ‘Insolvency and Bankruptcy Code, 2016’. The Code offers a uniform, comprehensive insolvency legislation encompassing all companies, partnerships and individuals (other than financial firms). The Government is proposing a separate framework for bankruptcy resolution in failing banks and financial sector entities. One of the fundamental features of the Code is that it allows creditors to assess the viability of a debtor as a business decision, and agree upon a plan for its revival or a speedy liquidation. The Code creates a new institutional framework, consisting of a regulator, insolvency professionals, information utilities and adjudicatory mechanisms, that will facilitate a formal and time bound insolvency resolution process and liquidation.

The code offers a lot of opportunities for the professionals of the 3 prestigious institutes i.e. the ICAI-CMA, ICAI-CA& ICSI. The members of the 3 institutes can register themselves as Insolvency Professionals thus generating a new professional avenue for practice. An individual can register himself as Insolvency Professionals under this code if he:-

(a) Has passed the National Insolvency Examination;

(b) Has passed the Limited Insolvency Examination and has fifteen years of experience in management, after he received a Bachelor’ s degree from a university established or recognized by law ;or

(c) Has passed the Limited Insolvency  Examination and has ten years of experience as-

(i) A chartered accountant enrolled as a member of the Institute of Chartered Accountants of India,

(ii) A company secretary enrolled as a member of the Institute of Company Secretaries of India,

(iii) A cost accountant enrolled as a member of the Institute of Cost Accountants of India, or

An advocate enrolled with a Bar Council.

 A Limited Liability Partnership or a registered Partnership firm or a company may be recognized as an Insolvency Professional Entity if:

a) The majority of partners of LLP/Registered Partnership are registered as Insolvency Professionals OR at least one of the partners in such partnership/LLP has 15 years of post-qualification experience.

b) The majority of the whole-time Directors of a company are registered as insolvency professionals.

Our Institute has incorporated a Section 8 Company namely Insolvency Agency of the Institute of Cost Accountants of India to function as Insolvency Professional Agency(IPA) under the Insolvency and Bankruptcy Code 2016.Interested members are required to submit an application  for registration in Form A of the Second Schedule to these regulations. Also INR. 10000 is required to be given as enrolment fee to the Insolvency Professional Agency of the Institute of Cost Accountants of India.Also a registration fee of INR. 5000 is to be paid to the Board on behalf of the company either through cheque or through demand draft.

The Insolvency Professionals are expected to adhere to a strict Code of Conduct as prescribed by the Board. Some of the qualities that are essential in this regard are integrity and objectivity, independence and impartiality, professional competence, representation of correct facts and correcting misapprehensions, adhering to the prescribed time limits, properly communicating proper responsibility to the relevant stakeholders, maintaining confidentiality among the others. They are also not to accept any gifts or hospitality which may undermine their capacity to function independently as an Insolvency Professional.

This new legislation will help create a new class of insolvency professionals that will specialize in helping sick companies. This will also help India to

score big on the Ease of doing Business Index. The more businesses grow, the better it would be for us members. It is hoped that the Code will help in having a strong insolvency regime as well propel us to become a business friendly nation.

The Institute of Cost accountants of India (ICAI) has also launched website for member’s registration under Professional insolvency Agency.

[To know more, kindly refer – , ].

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September 2021