Happy Beginning

Zappy completes 2 successful years of business and stepped in its third year on January 5.

On this occasion we are happy to announce our long awaited target of our online presence. Now you can see our profile and all the newsletter archives in https://www.zappyconsults.com

In this edition, we will be seeing about the Insolvency and Bankruptcy Code, 2016 along with our usual Legal terms and News Bites related to notifications by MCA, SEBI, RBI and IT Department.

Saranya Deivasigamani,
CEO

Insolvency and Bankruptcy

The Government has taken a new initiative by setting-up a modern insolvency mechanism based on the best practices in the world. The process of setting-up of an insolvency mechanism including setting-up of the Insolvency and Bankruptcy Board of India (IBBI) was done by the Government in the shortest possible time. 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.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. An Insolvency Professional Agency (IPAs) is a front line regulator for the insolvency professionals.An Insolvency Professional Agency enrolls professional members, lays down standards of professional conduct for them and monitors their performance. It also redresses the grievances of consumers against its members. The IBBI has granted registration to the following companies to act as IPAs under the IBBI Regulations, 2016:

Indian Institute of Insolvency Professionals of ICAI, and
ICSI Insolvency Professionals Agency.

The Institute of Company Secretaries of India, through the ICSI Insolvency Professional Agency, has begun enrolling those eligible and desirous of becoming insolvency professionals. The ICSI-IPA was enrolling members with 15 years experience, and the enrolment would be valid for six months after which the professionals need to take the examination to be conducted by the Insolvency and Bankruptcy Board of India. An Insolvency Professional is required to submit an application for registration in Form A of the Second Schedule of the Insolvency Professionals Regulations to IIIPI. The insolvency professionals would be created as a different set of professionals who would resolve disputes between the creditor and the debtor in case of corporate and individual insolvencies. The Adjudicating authority for corporate insolvency is NCLT and individual insolvency is DRT.

CA’s can elect to become Insolvency Professionals (IP’s). IP’s are those licensed professionals that are authorised by Insolvency Professional Agencies (IPA’s) and take up the roles of 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.

In order to be eligible for registration as an Insolvency Professional, a CA and CS 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 ten years as a CA or CS. It is important note that a CA or CS that appears for and clears the LIE only needs to have 10 years of work experience as a CA or CS. In other words, the work experience requirement that has been prescribed is only for the LIE and not the NIE. The Regulations do not prescribe any work experience requirement with respect to the NIE.

If a CA or CS fulfills 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 CA or CS has to make a separate application to the Board. The condition precedent for being considered for registration with the IPA is a prior registration with the Board. Further, the CA or CS has to pay a non-refundable application fees of .10,000/- (Ten Thousand only) to the Board.
After the CA or CS sends his application to the Board, the Board will acknowledge receipt of his application and then process his application.
While processing the CA’s or CS’s application, the Board may call for additional documents, clarification or information from the CA as it may deem fit. The Board may also call the concerned CA or CS for a personal hearing (if need be) for which the CA or CS 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 CA or CS 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:-
The CA or CS applying for a registration for a limited period 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.
The CA or CS should submit the application along with a non-refundable application fee of .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 CA or CS for a limited time duration as specified by the Board.
Insolvency Professional Entities CA’s or CS’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.
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.

Insolvency Professional Examination

The examination will be conducted online (computer-based in a proctored environment); with objective multiple choice questions;

The duration of the examination will be two hours;
A candidate will be required to answer 90 questions in two hours for a total of 100 marks;
There will be negative marking of 25% of the marks assigned for the question;
Passing mark for the examination is 60%;
Passing candidates will be awarded a certificate by the Board;
A candidate will be issued a temporary mark sheet on submission of test paper; and
No workbook or study material will be provided.

Along with the ambitious intention of restructuring India, the Code brings with itself a host of professional and business opportunities for Chartered Accountants and Company Secretary. These opportunities carry with themselves a tremendous growth potential. The profession of Chartered Accountants and Company Secretary is going to see tremendous growth in the years to come in the light of its expanded role under the regime of the Code.

Legal Term

De jure corporation

(n) A corporation in good standing under the law, as compared to a de facto corporation which is acting while not fulfilling legal requirements.

MCA Updates

Revised INC-7 form for incorporating Part 1 companies and companies with more than 7 Subscribers is made available on portal w.e.f. 15 Jan 2017 for filing purposes. For incorporating OPCs and Companies (with up to seven subscribers), SPICe (INC-32) should ONLY be used.

SEBI Updates

Guidelines for participation/functioning of Eligible Foreign Investors (EFIs) and FPIs in International Financial Services Centre (IFSC).
Reference to Circular no. FITTC/FII/02/2002 dated May 15, 2002- In regard to credit of proceeds due to write off of securities held by FPIs.
Disclosure of financial information in offer document for REITs and Continuous disclosures and compliances by REITs.

RBI Updates

Evidence of Import under Import Data Processing and Monitoring System (IDPMS).
Exim Bank’s GoI supported Line of Credit of USD 0.17 million to the Government of the Republic of Burundi.
Foreign Exchange Management (Transfer or Issue of Security by a Person Resident outside India) (Fifteenth Amendment) Regulations, 2016.
Foreign Exchange Management (Transfer or Issue of any Foreign Security) (Second Amendment) Regulations, 2016.

Income Tax Updates

DTAA signed with Cyprus.
Amendments made for rule 114C, and 114D, 114F.
(n) A corporation in good standing under the law, as compared to a de facto corporation which is acting while not fulfilling legal requirements.