E-governance model for official liquidators to help firms winding up biz

Written by Neha Pal | New Delhi | Updated: Jul 11 2009, 05:30am hrs
For setting up an e-governance mode for all the official liquidators (OLs) in the country, the ministry of corporate affairs (MCA) has decided to engage National Institute for Smart Government (NISG) to prepare a detailed project report (DPR) on the e-governance model of OLs.

NISG is a non-profit company which was set up on the recommendations of the task force on Information Technology and Software Development in 2002 by the government and Nasscom. The institute is at present involved in projects such as e-Gov World which is a knowledge portal on e-governance, UNDP-sponsored project known as ICT for Development, DCA21, Integrated Land Information System.

MCA has decided to engage NISG in order to prepare the detailed project report of the e-governance mode for the official liquidators across the country. The e-governance mode of OLs will ease the winding-up procedure of companies across India, said an MCA official.

At present, winding up a company is a long procedure where loads of paper work-related formalities are involved.

For avoiding delay in the winding up procedure, the ministry is planning an e-governance project for the official liquidation process so that the retrieval of all records and registers becomes easier and less complicated, said the official.

According to a World Bank report, the average time taken in dispensing cases related to winding up in High Courts is 10 years and the recovery rate is also very low.

The e-governance mode of official liquidators would be MCAs third e-governance venture. Before this, MCA had launched two other e-governance models - MCA 21 which falls under the Companies Act, 1956 and the LLP model, which comes under the ambit of LLP act.

Official liquidators are officers appointed under section-448 of the Companies Act 1956, attached to various High Courts and are appointed by the Centre.

OLs are also under the administrative charge of the respective regional directors who supervise their functioning on behalf of the Centre. These liquidators act according to the directions of the High Courts for winding-up procedures.

The Centre, under section 463 of the Companies Act 1956, has the responsibility of exercising overall control over the official liquidators to make sure that the operations are performed in the right manner and also ensure that the OLs duly observe all the requirements imposed on them under the Companies Act.

The delays in resolving insolvency issues result in the loss of physical, financial and human assets over a period of time. Apart from this, the company has to face a risk in investment due to a blockage of capital.