Bankruptcy code: Know the new world of insolvency professionals

Those who don the IP hat are usually chartered accountants or business managers

Insolvency professionals (IPs) are the new kid in town — in great demand particularly after the RBI asked banks to recover their bad debts on 12 large accounts through the new route. It is estimated that there are around 500 registered IPs in the country since the enactment of the Insolvency and Bankruptcy Code in May 2016. About 12 insolvency services agencies have come up in the past six months.
 

Those who don the IP hat are usually chartered accountants, cost accountants, company secretaries, lawyers, or business managers. However, one has to clear a regulator-mandated (Insolvency & Bankruptcy Board of India) examination to be an IP. 
 

A case for insolvency can be filed by the company itself (debtor) and creditors. Creditors could be financial institutions or operational ones such as those that provide services to the company such as vendors and suppliers. After a case for insolvency is admitted by the National Company Law Tribunal (NCLT), IPs have to prepare a proposal to restructure the company to the Committee of Creditors. After approval by the committee, IPs take over the company concerned and run it like promoters for 180 days, extendable by another 90 days. If a turnaround does not happen by this time, the company goes for liquidation.

However, the going need not be smooth for IPs as the resolution and liquidation process gathers steam. Mamta Binani, an IP and former president of the Institute of Company Secretaries of India (ICSI), says a successful IP has to get to grips with all aspects of running a company. A Delhi-based IP says how his team had to apply force to take control of the company that was going insolvent. “We were dealing with a company which was family-owned. Some of the employees were also family members. They ganged up against the team of IPs. We had to use force to take possession and begin the resolution process.”
 

A Kolkata-based insolvency professional says how much uncertainty the insolvency professional has to deal with in formulating a resolution for the company that has gone insolvent.
 

“Even after speaking to all creditors and coming to a consensus on the resolution plan, there is no surety of all of them casting their votes in favour of the plan,” he says. It will be learning on the job for those entering the fledgling profession.