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Meet India's Insolvency professionals: Male, chartered accountants and not so young

May 29, 2024

The typical Indian insolvency professional (IP) is a middle-aged male chartered accountant. Only 10% of the 4,352 registered IPs are women, and just 7% are under 40 years old, according to data from the Insolvency and Bankruptcy Board of India (IBBI). Most IPs are chartered accountants (55%), with the rest being company secretaries (17%), lawyers (6%), and cost accountants (5%). About 90% are aged between 40 and 70.

Male, chartered accountant and not so young – meet the typical Indian insolvency professional (IP). Only 10% of the country’s 4,352 registered IPs, who play a pivotal role in bankruptcy resolutions, are women. And fewer still, 7%, are below 40 years of age, as per the data compiled by the Insolvency and Bankruptcy Board of India (IBBI).

The data suggest that 55% of the IPs are chartered accountants (given their expertise in finance), 17% are company secretaries, 6% lawyers and 5% cost accountants. Besides, about 17% of them have been managers.

Almost 90% of the IPs are in the 40-70 age group, as per the data.

IPs are the backbone of the country’s insolvency ecosystem, as they take on the important roles of resolution professionals, liquidators or bankruptcy trustees.

The data, as of March 2024, includes only individuals, and not the 75 insolvency professional entities which have also been allowed to act as IPs after complying with regulatory stipulations.

Misha, partner at Shardul Amarchand Mangaldas & Co, cited two factors for fewer women practising as IPs: comparative lack of relevant experience and gender perception. “As an insolvency professional one is expected to handle several operational as well as process-related issues while dealing with multiple stakeholders at the same time. The perception is that the role may not be entirely suitable for women, though it is far from reality,” she said.

Yogendra Aldak, partner at law firm Lakshmikumaran & Sridharan, said the extensive continuous work experience required to be eligible for being registered as an IP is the primary reason why only 7% of them are under the age of 40. He also said: “Internationally, we have witnessed a steady increase in the number of female arbitrators owing to positive measures taken by the arbitral institutions in appointments. Similar steps by the insolvency ecosystem here will surely promote a greater gender balance.”

The data by the regulator show that until March 2024, 947 stressed companies were rescued through the Insolvency and bankruptcy Code (IBC) since the law came into being in 2016-17. The realisation for creditors from the resolution of these firms stood at Rs 3.36 lakh crore, representing 32.1% of their admitted claims.

Declining registration

The data showed that 1,716 IPs, or close to 40% of the current strength, were registered with the IBBI in 2017-18 alone, on top of the 1,073 in the previous year.

In recent years, the registration has fallen = 116 in 2023-24, 209 in 2022-23, 549 in 2021-22 and 506 in 2020-21. The regulator has so far cancelled the registration of 10 IPs citing disciplinary action.

Eligibility and processes

Professionals such as chartered accountants, company secretaries, cost accountants and advocates having 10 years of experience can aspire to become IPs. Even graduates with a decade of experience in law or master’s degree holders or post-graduate diploma holders in management, having 10 years of managerial experience, or graduates having 15 years of managerial experience, are eligible, among others.

The aspirants have to pass the limited insolvency examination and enrol themselves as professional members with an insolvency professional agency within 12 months. They can then complete a pre-registration educational course conducted by such an agency and apply to the regulator for registration as an insolvency professional.

[The Economic Times]

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