The Indian banking system (IBS) is currently tackling a crisis in the form of increasing gross non-performing assets (GNPA) which account for nearly 14% in bank assets of public sectors and 4% in bank assets for the private sector, with an astonishing 79% year on year growth as of March 2016.
Prevalent Challenges Of The Liquidation Process In India
When it comes to the liquidation process under IBS, India has been afflicted with the multiplicity of laws and regulations considering the insolvency and bankruptcy proceedings. In terms of the company liquidation process, insolvency and bankruptcy proceedings have made the resolution process both costly and time-consuming as the average time needed to resolve an insolvency issue has been noted to be nearly 5 years, presenting an average recovery rate of approximately 26%.
Now, consider contrasting this with the Organisation for Economic Cooperation and Development’s (OECD) list of high-income countries, where an average resolution time of only 1.7 years presents a recovery rate of approximately 73%. You can also contrast it with the liquidation processes and insolvency proceedings of China, where with an average resolution time of merely 1.7 years, companies get a recovery rate of nearly 36.9%, demonstrating how far behind India is concerning the whole resolution time and averages of recovery rates.
In this background, the Insolvency and Bankruptcy Code, 2016 (IBC) is set to change the accounting game. In order to amplify asset values and improve investor confidence, IBC aims to provide a competent and practical framework to handle the many business failures by pursuing to deal with insolvency and liquidation processes in a time-bound and effective manner.
Liquidation Process Under IBC: Paradigm Shift and Ker Drivers
Further, the liquidation process under IBC offers the much-needed paradigm shift— from the ‘Debtors in Possession’ to a ‘Creditors in Control” system, with creditors exerting timely control in case there’s a default in the repayment schedule of any debts, including any type of interests.
Considering the liquidation process under IBC, the key drivers of the insolvency resolution procedures would be the insolvency professionals (IP’s) due to their multifaceted position and obligation to a variety of other legal responsibilities.
Think about the fact that the IBC includes provisions on avoidance of transactions, fraudulent or unlawful trading, and safeguarding business value during the insolvency period. Who plays the most important role? Yes, the IP’s, as they are expected to discover and report transactions of suspicious nature. Therefore, IP’s need to stay equipped with extensive forensic skills or require support from a field expert.
How TRC Facilitates Insolvency Advisory Services?
TRC Corporate Consulting’s insolvency advisory services can assist you with multiple valuation and insolvency functions such as liquidation process in accounting, liquidation strategy and expert resolution professionals (IRP’s) to fulfil your company’s statutory obligations under the IBC.
Our team of expert insolvency professionals effectively handle the following:
Recognition of Unauthorized Assets Creation
Discovery of Undervalued Transactions
Identification of Circular Transactions
Management of Preferential Transactions
Reinforcement for Existing Projects
Detection of Transactions Duping Creditors
Finding Diversion or Laundering of Funds
How TRC Professionals Help With Liquidation Processes and Insolvency Functions?
Every business, whether private, public, or limited liability companies must get an accurate valuation before implementing the liquidation process. You, as the business’s owner, may not know the related rules, regulations and laws that are required to carry out insolvency proceedings.
But when your partner with us at TRC Corporate Consulting for insolvency proceedings, our experts help you with the following:
Forensic Review and Adjudications of Claims (Section 18 And 35)
We can support resolution professionals (RP’s) with processes of claim reviews, settlements and negotiations utilizing TRC’s proprietary forensic practices, that include but are not limited to:
Collation of Claims and Administration Processes
Forensic Reviews of Various Claims to Ascertain the Legitimacy of Evidence
Evaluating Unliquidated Claims or Prospective Damages
Liquidation Process Analysis And Support (Section 59)
Our insolvency experts can support liquidators to realize maximum value for company assets in several ways, which include but are not limited to:
Establishing a vigorous, compliant and supervised liquidation process.
Assessment of various financial and accounting documents to verify the suitability of complicated accounting adjustments that may impact asset valuations.
Revaluation of bidding processes for transparent and viable evaluation optimizing liquidation earnings
Supervising fund distributions in compliance with the IBC
Support In Ongoing Monitoring Of Operations (Section 18)
Our professionals can assist RPs with the assessment of continuing transactions during the insolvency resolution period to detect possible indicators of diversion, laundering of funds, or any fraudulent and illegal transactions.
Our proprietary assessments analyze extensive transactional data from multiple sources regularly, enabling compliance and ease of operations.
Asset tracking (Section 18)
At TRC, we use a sophisticated array of experience and resources to evaluate financial structures and reconstruct records to locate where funds are used for the creation of undisclosed assets. Our team of asset tracing professionals consider the following:
Authentication and verification of asset ownership by enquiries or documented proof
Layering of disclosed or undisclosed entities to identify probable corporate ownership status
Evidence of beneficial ownership trail, or proof that assets correspond to proceeds from fraud or other illegal activities
Due Diligence On Buyers
Our team at TRC can also assist the Committee of Creditors (COC) and RPs to conduct due diligence with our extensive knowledge. We can provide support in evaluating and analyzing the standing, integrity, and ownership edifices of companies, their principal stakeholders and management with our deep-domain capabilities.
Utilizing both publicly available information and our network of external resources, we discover background information for the following:
Intricate Corporate Structure
Anonymous Hidden Connections with Corporate Debtors
Tax Obligations and Avoidances
Perfect the Liquidation Process Under IBC
We, at TRC Corporate Consulting, can handle all your valuation and insolvency requirements. We follow the best of industry practices, incorporate our deep domain expertise and utilize the power of effective collaboration to enable optimal results for your business growth.
Contact our team for further understanding!
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