Besides amendments to the Companies Act, the government is contemplating simpler judicial processes involved in closing a business. According to sources, this is mainly due to the fact that most of the processes involved in closing a business are either quasi judicial or judicial in nature.
The government is also considering setting up a National Company Law Tribunal, establishing special courts for quick disposal of high-value cases along with performance audits and better management practices in the judicial system to hasten closing-down of businesses.
According to a World Bank report, shutting shop in India takes approximately 10 years and costs a whopping 9% of the total value of an estate and consists of about 14 processes.
Whereas, just eight months are needed to exit businesses in China, France, South Korea, Malaysia, Singapore, the US and the UK, the report says.
India proves to be more expensive, too, as exiting businesses costs 6.3% of an estate in other countries of the region and 7.1% in OECD countries.
Sources said a committee, headed by the ministry of company affairs secretary, had been set up to deliberate on the issue and recommend more measures. Other members of the committee would be secretaries of departments of banking, industrial promotion and policy, and ministry of legal affairs.
The committee will be expected to submit a report in a months time.
The move comes in the wake of a recent World Bank report Doing Business in 2007, which points out that the time taken and the cost incurred to close a business in India are significantly high compared with other countries, and that the situation has not changed over the last two years.