Scope of Professionals in Changing Regulatory Environment
Published: Aug 07, 2017
By Meenu Gupta, CS
AS the Indian regulatory environment is constantly changing, there are opportunities galore for professionals including Chartered Accountants, Company Secretaries, Cost Accountants, Advocates, Tax Experts, IT Professionals, etc. As companies and banks have been facing the maximum number of regulatory changes to comply from General Anti-Avoidance Rules (GAAR), Goods and Services Tax (GST), Audit Rotation to Indian Accounting Standards to changes/amendments in Indian Companies Act, 2013, companies across sectors are rushing in to get their business structure in place, leading to jump in demand for varied professionals in areas of auditing, accounting, corporate governance, taxation, Insolvency Professional, Valuation Professional. In this article, attempt has been made to bring out the areas where professionals can explore the work opportunities with the increasing regulatory reforms in Country.
Companies Act, 2013
1. Section 149 as Women Director
Women Chartered Accountants, Company Secretaries and Women Cost Accountants are well-equipped and empowered to act as women director on boards of Indian Companies mandated as per Section 149 (1) of Companies Act, 2013.
2. Key Managerial Personnel
Key Managerial Personnel has for first time been defined under the Act to include Chief Executive Officer (CEO) or Managing Director or Manager, Company Secretary or Whole-Time Director (WTD), Chief Financial Officer (CFO) and such other officer as may be prescribed. Since the statutory disclosure requirements for a corporate mandates the various statements/reports about the financial affairs of a corporate to be reviewed by key persons of corporates from the viewpoint of requirement of corporate laws, thereby underlining the scope for professionals to consolidate such statements/reports at one place.
3. Independent Directors
The Companies Act has taken innumerable measures to promote corporate governance standards across the globe and the concept of independent director on boards is one of them envisaged to bring objectivity to Board decisions, protecting the interests of company and its stakeholders to observe improved growth and sustainability of businesses. They have to play increased and independent role in framing CSR Policy, Nomination and Remuneration Committee and their implementation at the Board.
4. Appointment as Liquidator under Section 275
The section stipulates that provisional liquidator or the Company Liquidator, as the case may be, shall be appointed from a panel maintained by Central Government consisting of the names of Chartered Accountants, Advocates, Company Secretaries, Cost Accountants, or firms or bodies corporate having such chartered accountants, advocates, company secretaries, cost accountants and such other professionals as may be notified by Central Government or from a firm or a body corporate of persons having a combination of such professionals as may be prescribed and having at least ten years' experience in company matters.
Real Estate (Regulation and Development) Act, 2016
The Act vide Section 56 authorises the Chartered Accountant, Company Secretary, Cost Accountants to appear and present the case on behalf of Client before the Appellate Tribunal or Regulatory Authority or the Adjudicating Officer under the Act. Further, the Chartered Accountant may also provide Consultancy Services under the Act and conduct audit of developers etc. in complying with the requirements of the Act.
Goods and Services Tax (GST)
GST is a historical indirect tax reform in India wherein around 9.5 million registered taxpayers in the Country presently will be registered on GST portal. As per a research, if even 1% of these are large companies requiring five people to handle GST and 10% are mid-sized firms that need atleast one person to handle GST, the new tax system will have created demand for about 1.3 million professionals for the Country. Further statutory compliances including submission of audited accounts by taxpayers with turnover of Rs. 1 crore and an annual report reconciled with audited balance sheet and profit and loss will bring in significant amount of convergence between GST and indirect compliances accentuating the role of tax professionals.
Additionally, GST is emerging as a key function across businesses involving uploading invoice-wise supply details both on sales and purchase events, matching of invoices that will have an impact on financial savings, revenues and thereby profits if the same is not handled with by the expert cross functional GST teams in corporates, meaning thereby, underlining the work and opportunities for professionals in new regime.
GST will be an altogether digital tax portal with all data, records, processes, returns and compliances to be furnished on an online portal which will require an integration, reporting and accounting solutions and platforms, a sophisticated accounting and reporting and Management Information System (MIS) to integrate into tax network and to claim input tax credit. Professionals with knowledge of software (ERP, SAP, Tally); banking and financial applications will be apt for revamping existing tax infrastructure.
The advent of GST will involve transitional phase to redesign their business models in line with GST infrastructure from restructuring supply chain systems, analyzing existing credit availment, its reviewing stocks of inventory, negotiating contracts, undertaking impact analysis and the professionals with tax, accounting and information technology will be best suited to bringing in smooth transition of current business tax structures.
Insolvency Professionals under Insolvency & Bankruptcy Code
With India enacting laws for resolution of stressed assets in Indian Banking Sector through Insolvency and Bankruptcy Code, 2016 wherein the fate of bad loans is actually dependent on the proficiency of Insolvency Professionals (IPs) acting as crucial players for the success of Rs8 lakh crore recovery process encompassing a wide range of functions from legal, accounting and financial perspectives. He is responsible for identifying the performance of debtor, evaluate to assess whether it can be revived else initiating the liquidation process for debtor while also ensuring and protecting the rights and interests of all stakeholders.
Considering the time India takes in resolving bankruptcy which is 4.3 years, there is a clear requirement of significant number of Insolvency Professionals who can handle increasing number of insolvency cases. They will be able to rescue the banks and creditors from increasing number of NPAs and losses which are sinking the banking industry and affecting the entire economy in general.
He can act as Interim Resolution Professional who are appointed by borrower for first 30 days of proceedings at NCLT and as Resolution Professional who are usually appointed by Committee of Creditors for the next 150-240 days of stipulated period.
The primary objective of an Insolvency Professional is to find a resolution plan. Chartered Accountants, Cost Accountants, Company Secretaries and Lawyers with a minimum of 10 years of post-qualification experience may be eligible to be appointed as Insolvency Professionals.
Regulation 13 of the Act provides that no person is allowed to render service as an Insolvency Professional except as a member of Insolvency Professional Agency. Such a member is also required to register with Board (Section 206/207) of the Code. Regulation 6 of said regulation imposes certain duties on members in performance of duties as an Insolvency Professional. They:
i. act in good faith in discharge of their duties as an Insolvency Professional
ii. endeavor to maximize value of assets of debtor
iii. discharge their functions with utmost integrity and objectivity
iv. be independent and impartial
v. discharge their functions with highest standards of professional competence and ethics
vi. continuously upgrade their professional expertise.
vii. perform duties as quickly and efficiently as reasonable, subject to the timelines under the Code
viii. comply with applicable laws in the performance of his functions
ix. maintain confidentiality of information obtained in the course of their professional activities unless required to disclose such information by law
Section 25(1) provides that it shall be the duty of resolution professional to preserve and protect the assets of corporate debtor, including the continued business operations of corporate debtor.
Regulation 3 of Insolvency & Bankruptcy Board of India Regulations, 2016 provides that an individual is not eligible for registration unless he (a) has passed the National Insolvency Exam; (b) has passed the Limited Insolvency Exam and has 15 years of experience in management, after receiving Bachelor's degree from a University established or recognized by law; or (c) has passed the Limited Insolvency Exam and has 10 years of experience as CA enrolled as a member of ICAI, a CS enrolled as a member of ICSI or a Cost Accountant enrolled as a member of ICMAI and an Advocate enrolled with a Bar Council.
Challenges & Expectations from Insolvency Professionals
The role of IPs though is rewarding but is an equally challenging career necessitating high standards of integrity and probity act as an intermediary between debtors/creditors on one hand and Adjudicating Authority on the other and functions under watchful eyes of Agency and the Board. In terms of work, he has to ensure secretarial, legal, finance, management of business of debtor and the assessment of assets and liabilities of debtor, valuation and sale of assets fall under the supervision of insolvency professional.
They have the scope of opportunities in identifying and analyzing the distressed companies requiring restructuring, planning out a financial structure of banking business and the restructuring plan, drafting insolvency petitions, appearing before Debt Recovery Tribunals, representations before NCLT and NCLAT and advisory services to management on regular basis.
They need the skills to deal with creditors, the directors, the employees concerned and a range of other stakeholders in businesses.
The Insolvency Professional Agency of which IP is a member is entrusted with the task of developing the insolvency professional of its members by organizing educative programmes for keeping the members updated on national and international development on a continuous basis in the field of insolvency and related issues. Further, it is also changed with the responsibility of advising the Agency on development of IP, setting high standards for professional and ethical conduct and observance of best practices in relation to insolvency relation, liquidation and bankruptcy.
An IP is expected to ensure maximization of returns to creditors. When an IP is appointed to a case, they essentially have to grasp operations of business and decide what to do with it. There is no fit-for-all formula for dealing with a business in the situation; a careful judgement must be made in each case faced with a struggling company, an IP is expected to take over company's reins, reverse its decline and bring the company back on track and continue trading to increase returns to creditors; or, in cases where the company is extremely weak and cannot survive close it down.
IPs are considered as instrumental to the success of IBC which will not only prevent business failures but it will definitely facilitate failed firms to windup seamlessly.
Conclusion
Since Indian Companies are witnessing a number of regulatory changes including those on tax and auditing that could entirely change the way business is done, they have to devote resources on internal functional teams having hands on experience in financial, legal, taxation and information technology to explore challenging opportunities under this changing regulatory landscape.
