Insolvency system starts with 600 professionals

Agencies under ICAI, ICSI see brisk registration in the first month

Around 600 senior executives have registered to operate as insolvency professionals (IPs) under the new bankruptcy code, in just a month’s time.

This first set of professionals, who will have to qualify in an online ‘Limited Insolvency Exam’, will implement the new code on the ground.

IPs are the frontline executives, who will take over the affairs of a company once the corporate insolvency process kicks in. They will report to a committee of creditors, which will replace the board of directors once the National Company Law Tribunal (NCLT) clears the application.

In the initial stage, the Insolvency and Bankruptcy Board of India (IBBI), the regulator, had allowed chartered accountants, company secretaries, cost accountants and advocates with at least 15 years’ practice to register as IPs.

This limited period registration, which began at end-November closed on December 31. The members were enrolled through Insolvency Professional Agencies floated by professionals’ bodies such as The Institute of Chartered Accountants of India (ICAI), Institute of Company Secretaries of India (ICSI) and Institute of Cost Accountants of India.

In the second stage, the registration process would be thrown open to a wider range of students and professionals through the National Insolvency Examination.

The IBBI is in the process of putting this in place. The Insolvency and Bankruptcy Board of India (Insolvency Professionals) Regulations came into force on November 29.

ICAI’s IP agency is said to have registered the highest number, followed by ICSI. “We have registered about 225 IPs under the limited period registration,” said a senior executive. Of these, about 80 are advocates.

According to the IBBI website, ICSI president Mamta Binani was the first IP to be registered, on November 30.

IPs say a handful of companies have approached NCLT for corporate insolvency. These include Synergy Durex, which approached the Hyderabad bench.

ICICI Bank has moved a petition on Innoventive Industries in Mumbai. UB Engineering is another company said to be in the process. NCLT is yet to clear any of these. Delhi-based Nilesh Sharma, among the first IPs, said while the framework is in the initial stage and might have teething trouble, the opportunity is immense in the long run. He feels unsecured creditors will utilise this framework in large numbers, as they’d no longer have to file petitions for winding-up.

They could earlier not go to the Debt Recovery Tribunal but would now be able to file cases at NCLT.

Sharma, a senior partner with Dhir & Dhir Associates, said the new framework would help tackle the problem of bad debts in banks in the long run.

The professionals also expect cases referred to the Board for Industrial and Financial Reconstruction to be taken up for liquidation under the bankruptcy code, following a notification to this effect by the finance ministry.

An IP has key responsibilities in various processes such as corporate or individual insolvency resolution, liquidation of a corporate debtor or individual bankruptcy under the Insolvency and Bankruptcy Code of 2016.

No person can render services as an IP without being enrolled as a member of an insolvency professional agency and registered with IBBI.