Insolvency: the story explained

Insolvency cases under Rs 100 crore should be managed by individual professionals, while larger cases go to entities, recommends a study by IIIP-ICAI. Insolvency has emerged this Friday as one of the stories drawing attention in New Zealand.

Key facts

• Insolvency cases under Rs 100 crore should be managed by individual professionals, while larger cases go to entities, recommends a study by IIIP-ICAI.
• Study suggests individual insolvency professionals handle debt cases up to ₹100 cr.
• A discretion in section 33C(3) operates to soften the impact of that (and two other insolvency related) prohibition, provided the Secretary is satisfied of (all) three key matters, discussed under the headings below.
• Larger cases for insolvency professional entities.
• Another proposal is to raise IPs' age limit to 75.

What we know

Going deeper, Study suggests individual insolvency professionals handle debt cases up to ₹100 cr.

On the substance, a discretion in section 33C(3) operates to soften the impact of that (and two other insolvency related) prohibition, provided the Secretary is satisfied of (all) three key matters, discussed under the headings below.

Beyond the headlines, Larger cases for insolvency professional entities.

More precisely, Another proposal is to raise IPs' age limit to 75.

It is worth noting that the study also recommends augmenting the roles of insolvency professionals beyond the Insolvency and Bankruptcy Code, and proposes extending the professional age cap to 75 years.

By the numbers

At this stage, the applicant had been a director of a (licensed) company placed in administration in 2020.

On a related note, Accordingly, the applicant had been found to not satisfy the mandatory requirements in section 33B(1)(a)(xvi) of the Home Building Act 1989 (NSW) (HBA) to be granted a contractor licence.

Going deeper, Section 33B(1)(a) lists a number of factors which must cause the Secretary to not issue a licence.

On the substance, Among them is if the applicant is a director (or person concerned in the management of) of a company which became insolvent within 10 years before the application.

The wider context

On a related note, Licensing has been a focus topic in our team lately and for good reason.

Going deeper, If you’re a residential builder or a specialist trade in NSW, then no ticket, no play.

On the substance, In relation to whether the applicant had taken all reasonable steps to avoid the liquidation, the Tribunal noted that the point of commencement of the enquiry was when the applicant was 'faced with the possibility' of insolvency or was 'aware' or 'should have been aware' of that possibility.

Beyond the headlines, the applicant’s evidence was that he had implemented several risk mitigation strategies in his new business to avoid any future risk of insolvency.

More precisely, the existence of a discretion to assist applicants with an insolvency in their background should not be considered a free pass to a licence.

The bottom line

• A discretion in section 33C(3) operates to soften the impact of that (and two other insolvency related) prohibition, provided the Secretary is satisfied of (all) three key matters, discussed under the headings below.
• The study also recommends augmenting the roles of insolvency professionals beyond the Insolvency and Bankruptcy Code, and proposes extending the professional age cap to 75 years.
• The applicant’s evidence was that he had implemented several risk mitigation strategies in his new business to avoid any future risk of insolvency.