WIRC Bulletin - November 2018

“Strategy for preparation and passing of the Limited Insolvency Exam of IBBI”

“Strategy for preparation and passing of the Limited Insolvency Exam of IBBI”

CMA Pramod Jain, Contact : 97660 34562 • E-mail: [email protected]

 

Since independence, the insolvency laws in our country have not only been archaic in nature but also highly inefficient in achieving the desired results of turning the bad assets around and making  the same available, back in the economy for unlocking the economic wealth.

It is a well-known fact that in yester years in our country, cases pertaining to insolvency, bankruptcy and liquidation would keep on pending for decades in different courts with no outcome whatsoever. And in this process, quality of the underlying assets would become bad to worse, resulting into tremendous loss to the economy of the nation.

To overcome these lacunas, the Govt of India has brought out a new legislation called, Insolvency & Bankruptcy Code (IBC) 2016. On perusal of this new law, one finds that this law has provisions for closing the matters relating to Insolvency & Bankruptcy in a time bound manner so as to ensure that the wealth of the nation, locked in the toxic assets, is turned around at the earliest and made available to the economy of the country.

Interestingly, this new law offers tremendous professional opportunities for the people practicing as Company Secretary, Chartered Accountant, Cost Accountant or as a Lawyer, having a minimum of 10 years’ post qualification experience.

At the same time, with a view to ensure that only professionals with requisite knowledge and understanding of business and laws relating to Insolvency & Bankruptcy enter this field, the Insolvency & Bankruptcy Board of India (IBBI) has prescribed an examination, known as Limited Insolvency Examination (LIE).

All the eligible practicing professionals who wish to enter the field of Insolvency & Bankruptcy, have to pass this examination upon which they are allowed to become member of IBBI and practice as Insolvency Professionals (IPs). This online examination of two hour duration, is conducted by the BSE Institute with its centers spread throughout the country. It is a very interesting yet a very challenging examination, as the syllabus is quite vast.

I am fortunate to have passed this examination and have already become member of IBBI and now practicing as an Insolvency Professional, besides Chartered Accountancy.

Since this is a new field and still the level of awareness is not so high, I thought to pen this article for the benefits for all our fellow professionals who may aspire to enter this new field. I am sure, all such aspirants will find this article very much useful in their pursuit to cross the first hurdle, of qualifying the Limited Insolvency Examination.

For the sake of clarity and ease of reading, I have divided this article in four parts in sequential progression as given here.

Part-I: Eligibility

  • This Exam is available in two formats namely, 1) Limited Insolvency Exam and 2) National Insolvency Exam
  • Presently, only Limited Insolvency Exam route is available.
  • CAs/CMAs/CSs/Advocates with 10 years’ post qualification experience are eligible to become member of IBBI as qualified Insolvency Professionals.
  • And if you have passed the Exam after 1st April, 2018, you also need to undergo a mandatory training of 50 hours before you could apply for the membership of IBBI as well as IPA. IPA is Insolvency Professionals Agency.

Part-II: How to enroll for the Examination

  1. Firstly, visit the website of IBBI at http://www.ibbi.gov.in/ and register yourself. It will require uploading of a photo, PAN and Aadhaar card, so keep the same handy. You will receive Login ID and Password, after completing this process.
  2. Now, log in to IBBI website, select the tab Examination and click on the “Limited Insolvency Exam (IBBI)”, this will take you to the BSE Institute page. Enroll yourself for the Exam following the steps.
  3. You will need to pay a fee of 1500/- which can be done online using Netbanking or Credit/Debit card.
  4. After paying the fees, select the date and exam centre of your convenience.
  5. This fee is to be paid for every attempt that you take every time. And there is no limitation as to how many attempts one can take.
  6. Now you are all set for the Examination. .
  7. Also download the Exam Syllabus from website of IBBI, applicable from 1st Nov 2018.
  8. The current Syllabus is valid upto 31st October and changing from 1st 2018

It will not take you more than two hours to cross this hurdle and complete all 8 steps mentioned above.

How to prepare for the Exam and how to write it, is covered in the following slides.

Part-III: How to prepare for the Exam

As mentioned before, this Exam is not only very interesting but at the same time challenging. Interesting, because this is not a typical pen & paper exam, which would involve subjectivity to some extent.

Rather, it is an online MCQ based examination where your answer has to be absolutely accurate. And plus, there is a negative marking of 0.25 marks for each 1 mark question which is answered wrongly. Hence one has to be absolutely meticulous in preparation for the exam as well as in writing the exam. What worked for me in passing this exam is as follows:

  1. Firstly, pick up a copy of the bare act on IBC of any publisher which should also contain Rules and Regulation under the Code. When you read through this bare Act, use a highlighter pen to highlight whatever you think is of importance from the point of view of the Exam.

Go through this book thoroughly, 2-3 times, making notes side by side. This is very very important.

Reading of the bare act 2-3 times will make all the provisions clear in your mind and you will be able to answer any question on IBC that would appear in the Exam.

New Rules & Regulations are being added continuously. Therefore, you also need to prepare the same. The new Syllabus is starting from 1st November 2018, therefore, all the rules and regulations issued upto 31st October, 2018 will be part of the syllabus.

Interestingly, the above action points, cover 66% of the syllabus of the Examination. Because, case studies and transaction analysis which appear as questions in the paper, are also based on the above mentioned points only.

  1. Remember, we need 60 marks out of 100 to pass this exam.
  2. Having done the above, now focus on 1) RDDBFI Act, 2) SARFAESI Act, 3) CDR, 4) SDR, 5) and 6) S4A of RBI, 7) The Arbitration and Conciliation Act, 1996; 8) The Limitation Act, 1963. All these topics put together have a weightage of 6 marks out of 100.

For RDDBFI, SARFAESI, the Arbitration and Conciliation Act, 1996 and the Limitation Act, 1963, use the bare Acts whereas for CDR, SDR etc material can be downloaded from the portal http://www.iiipicai.in/ .

Though this site is by the ICAI but it is open to all aspirants of IBC Exam irrespective of whichever Institute they may belong to. It has good number of videos and others material including copies of all the bare acts.

It also has so many mock tests which are extremely useful in getting the feel of real exam. Make extensive use of this portal. I am sure, you will find this portal extremely useful.

  1. IPA of ICSI has also been mailing to all its members very useful materials, MCQs and Case Studies from time to time. You must make full use of the same as this too would help you in passing this examination.
  2. After SARFAESI etc mentioned under action point 13 above, shift your focus on:
    1. Companies Act,
    2. The Partnership Act, and
    3. The LLP Act.

These Acts have a weightage of 10 marks

About the Companies Act, pick up any latest book on Companies Act and refer all the Chapters prescribed as part of the Syllabus for the Exam.

And for the Partnership Act and LLP Act, pick up the bare acts and prepare from the same.

  1. Now the next part covers:
    1. The Indian Contract Act,
    2. Transfer of Property Act and
    3. The Sale of Goods Act.
    4. Specific Relief Act, 1963.
    5. Negotiable Instruments Act, 1881.

These five Acts put together have a weightage of 6 marks out of 100.

  1. Now remember, our aim is to pass this exam by ensuring that we get at least 60 marks in our attempt. Therefore, considering the input-output ratio, I decided to prepare only for the Indian Contract Act and took the Transfer of Property Tax Act and the Sale of Goods Act in option. And this really worked for me very well. I am sure, it should for you too. But depending upon availability of time with you, you can decide otherwise.

In any case, the MCQs given on http://www.iiipicai.in/ will prepare you relatively well for the Transfer of Property Tax Act and the Sale of Goods Act as well, without investing too much time in them. Here again, I used the bare act of The Indian Contract Act.

 

  1. Then there are 2 more areas forming for part of the IBC Exam Syllabus and i.e. 1) General Awareness and 2) Finance & Accounts, weightage of 6 marks.

I did not do any special preparation for these 2 topics as it is just not possible also, as these are so vast topics. But I am sure, your professional experience should be able to help you to do well in respect of these topics.

However, you can prepare yourself on the topics such as Financial Ratios, CAPM Model, Operating Leverage, Financial Leverage and broad understanding of IndAS.

Do not, do not, do not, try to memorise anything rather read the contents minimum 3-4 times and more.

  1. Kept offences and penalties related provisions from the IBC Code in option, as there are too many and that too with differing quantum in every case with very little consistency.

In any case, I thought the aim is to pass the Exam and there is always a limitation of time. Therefore, I applied the above strategy for preparation and with god’s grace I could pass the exam, with it.

Hopefully, this will work for you too. And I would be too happy to know that it did.

Part-IV: Strategy in taking the Exam

In my experience, passing the IBC Exam, 75% depends on “how well you have prepared for it” and the remaining 25% depends on how well you tackle the actual Exam. And in my view, it is this 25% part which makes the real difference.

  1. First of all, please remember, it is not important as to how many questions you attempt, what is important is, how many questions you attempt correctly, as there is negative marking of 0.25 marks for every wrong answer which you give for a question of 1 mark. And this can be really killing and frustrating.

For example, let us say, you attempted all the questions in your attempt to somehow make it. And you answered questions worth 67 marks correctly and questions worth 33 marks wrongly.

So even though you got 7 more marks than required for passing the exam, you would still fail because, the 33 questions answered wrongly will eat 8.25 marks of your marks because of negative marking. As a consequence, your actual score will come down to 58.75 i.e. (67-8.25). What a pity, isn’t it?

  1. So how should you go about tackling the exam so as to avoid this mishap? Just follow the following strategy with whatever modifications which you may feel appropriate.

To begin with, keep answering only those questions about which you are 100% sure that you know the correct answer. Follow the principle of “First time right”.

If you are not sure about a question, “mark it for review”. But before doing so, click on the option which you think, should be the correct answer for this question. So that next time when you come back to it, you do not have to spend too much time on it again.

And when you are sure about a question that, you definitely do not know the answer of it, just skip it. No need to spend time on it at all, either now or later.

  1. Now after completing the entire paper, following the above three steps, by clicking the review icon you will see in front of you:
    • How many questions you have attempted about which you are absolutely sure in your own judgement.
    • How many questions you have kept open for review and
    • How many questions you have not attempted at all (these are the ones you are sure that you do not know the answer).

Now let us assume that the total no. of questions for which you are absolutely confident, is 65, which defacto means you are through. Therefore, you need not do anything. It is possible that you may have some surplus time, have a quick look on the questions “marked for review”, if something is found simple to answer, otherwise you can close the Exam, get the good news of passing it and go home with a smile on your face and result in your hand.

  1. Second scenario, let’s say for example, you have answered 55 questions (or questions worth 55 marks) about which you are absolutely sure. So now your task is to just ensure that out of the questions which you have marked for review, you are able answer about 8-10 questions correctly, if it is more, so much better.

So, now read the question and the multiple choices very very carefully with total concentration and focus so as to be able to, use the logic of elimination of wrong options and thereby try and reach to the correct answer.

Please don’t try guess work (mutka), it can be dangerous. Keep your head absolutely cool. And keep on working on it and I am sure, you will certainly reach the desired number and sail through the exam.

  1. The total of questions is about 86 and not 100, as few questions carry 2 marks each.

There are few Case Studies which are again based on the provisions of IBC 2016, will have 3-4 questions of 2 marks each.

Time is of absolute essence in this Exam, hence ensure that you do not get stuck up on any question, give a calculated time and move on.

  1. One more suggestion which I would like to make is, even if you are not fully prepared at this moment, just schedule and appear for this exam at your earliest possible. This will help you in many ways.
    • Firstly, it will make you aware of the entire process of the exam and how you should play the above strategy.
    • Secondly, it will make you realise, what kind of questions appear in the exam and
    • Finally, it will make you realise, how well you are prepared and how much more preparation you still have to do. This will cost you Rs. 1500/- extra, but I think this investment is definitely worth it.
  2. Please also remember some of the questions carry 2 marks whereas most of them carry 1 mark each. This you can see on your screen and answer the questions which carry 2 marks each with even greater care and awareness as wrong answer to such a question will eat 0.5 marks of your score.

I hope this article will help you not only in preparing for the Insolvency Exam but also pass it successfully.  I wish you goodluck and grand success.

 

 

 

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