Expanding Role of Management Professionals, Chartered Accountants, Company Secretaries, Cost Accountants and Advocates under the regime of the Insolvency and Bankruptcy Code, 2016

Introduction

The Insolvency and Bankruptcy Code, 2016 ("Code") has been introduced with the primary objective of increasing lender's confidence and facilitating expansion of the credit market in India. As has been stated in the objects clause, the objective of this new law is to promote entrepreneurship, availability of credit, and balance the interests of all stakeholders by consolidating and amending the laws relating to reorganization and insolvency resolution of corporate persons, partnership firms and individuals in a time bound manner and for maximization of value of assets of such persons and matters connected therewith or incidental thereto.

While the primary objective of the Code has been clarified by the Government, the Code alsoparallely creates a host of professional opportunities for finance and legalprofessionals. In this article, I am going to focus on how a Management Professional/Chartered Accountant/Company Secretary/Cost Accountant/Advocate can benefit professionally under the regime of the Code.

Professional Opportunities for Management Professionals/ Chartered Accountants/ Company Secretaries/ Cost Accountants and Advocates under the Code

Having perused the Code, I believe that the role ofManagement Professionals, Chartered Accountants, Company Secretaries, Cost Accountants and Advocates (I collectively refer to them as "Professionals")has expanded significantly under the regime of the Code. Some of the professional avenues that have opened for the above enlistedProfessionals under the Code are enlisted as under:-

• Insolvency Professionals

• Concept of Insolvency Professionals

Professionals can elect to become Insolvency Professionals (IP's). IP's are those licensed professionals that are authorised by Insolvency Professional Agencies (IPA's)which take up the roles of Interim Resolution Professional/ Resolution Professional/Liquidator/Bankruptcy Trustee in the insolvency resolution process of different entities as have been envisaged under the Code. Insolvency Professional Agencies (IPA's) are those specialized bodies that are statutorily authorised to execute the task of registration and governance of Insolvency Professionals.

• Eligibility Criteria for enrolling as an IP, Process of Registration and Concept of Registration for a Limited Period

The criteria for registration of an IP are enlisted under the Insolvency and Bankruptcy Board of India (Insolvency Professionals) Regulations, 2016 ("Regulations").

In order to be eligible for registration as an Insolvency Professional, a Professional has to fulfill the following criteria:- 

• Register with an IPA.


• Appear for and clear the Limited Insolvency Examination ("LIE") or the National Insolvency Examination ("NIE").


• Have a work experience of fifteen years as a management professional after having received a bachelor's degree from a university established or recognized by law.


• Have a work experience of ten years post enrollment as a Chartered Accountant/Company Secretary/Cost Accountant/Advocate.

It is important note that a Chartered Accountant/ Company Secretary/ Cost Accountant/Advocate that appearsfor and clears the LIEneeds to have 10 years of work experience post enrollment (or 15 years post qualification work experience in case of management professionals).

In other words, the work experiencerequirementhas been prescribed is only for the LIEand not the NIE. The Regulations do not prescribe any work experience requirement with respect to the NIE.

If a Professionalfulfills the eligibility criteria, then he has to take the following steps to register himself as an IP:-

• The Code and the Regulations demand a dual registration for IP's. The primary registration of an IP has to be done with the IPA whereas the secondary registration has to be done with the Insolvency and Bankruptcy Board of India (Board). Hence after being registered as an IP with an IPA, the Professional has to make a separate application to the Board. The condition precedent for being considered for registration with the Board is a prior registration with an IPA. Further, the Professional has to pay a non-refundable application fees of Rs.10,000/- (Ten Thousand only) to the Board.


• After the Professional sends his application to the Board, the Board will acknowledge receipt of his application and then process his application.


• While processing the Professional's application, the Board may call for additional documents, clarificationor information from the Professional as it may deem fit. The Board may also call the concernedProfessional for a personal hearing (if need be) for which the Professional can either go himself or send an authorised representative.


• After processing the application, the Board may grant a Certificate of Registration or refuse the same. If the Board refuses registration, it will explain the reasons for its refusal and give an opportunity of a personal hearing to the applicant Professional to allow him to explain to the Board as to why his application should be accepted within 15 days of the receipt of the communication from the Board so that the Board can form its final opinion.

The Regulations also float a concept of registration for a limited period as an IP. In order to be registered as an IP for a limited period, the following needs to be noted:-

• Only Chartered Accountants, Company Secretaries, Cost Accountants and Advocates can apply for a registration for a limited period. In order to be eligible for limited period registration, a Chartered Accountant/Company Secretary/Cost Accountant/Advocate has to be in practice for a period of 15 years. That is the eligibility criterion that has been prescribed with respect to limited period registration.


• Please note that as per Regulation 9 of the Insolvency and Bankruptcy Board of India (Insolvency Professionals) Regulations, 2016,management professionals are not covered in the ambit of registration for a limited period as an Insolvency Professional.


• The Chartered Accountant/Company Secretary/Cost Accountant/Advocate should submit an application for registration in Form A of the second schedule to the Insolvency and Bankruptcy Board of India (Insolvency Professionals) Regulations, 2016 along with a non-refundableapplication fee of Rs.5000/- to the IPA where he is enrolled. The IPA shall in turn forward the application and the application fees to the Board which shall be ultimately processed by the Board.


• The Board shall then register the Chartered Accountant/Company Secretary/Cost Accountant/Advocate for a limited time duration as specified by the Board. 

• Insolvency Professional Entities

Professional's after being registered as IP's can also establish Insolvency Professional Entities (IPE's). An IPE as defined under the Regulations is a limited liability partnership, a registered partnership firm or a company that:-

• Has a majority of its partners registered as IP's in case of limited liability partnerships and registered partnerships

OR

• If majority of the Whole Time Directors of the Company are registered as Insolvency Professionals in case of a company.

Application for registration as an Insolvency Professional Entity:-

• Any person who is eligible for registration as an Insolvency Professional Entity shall make an application to the Board to be recognized as an Insolvency Professional Entity in Form C in Second Schedule to the Regulations.


• If the Board is satisfied, then after such inspection and inquiry, can issue a Certificate of Registration to the applicant IPE.

Simply put, an IPE is an incorporated entity comprising of IP's.In my opinion, the most favourable aspect of incorporating and running an IPE is the sheer potential that it has for expansion. Incorporation as an IPE will also provide the necessary logistical and technical support that is needed for expansion and subsequent business development. Further, it also creates a professional platform for IP's to interact and grow professionally.

Conclusion

Along with the ambitious intention of restructuring India Inc., the Code brings with itself a host of professional and business opportunities for Management Professionals,Chartered Accountants, Company Secretaries, Cost Accountantsand Advocates. These opportunities carry with themselves a tremendous growth potential. These professionsare going to see tremendous growth in the years to come in the light of their expanded role under the regime of the Code.

Pranav Khatavkar, is a Mumbai based independent legal professional, who has penned India's first commentary on the Insolvency and Bankruptcy Code, 2016. The book has been previously reviewed on Live Law.

[The opinions expressed in this article are the personal opinions of the author. The facts and opinions appearing in the article do not reflect the views of LiveLaw and LiveLaw does not assume any responsibility or liability for the same]

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