To ease the winding-up of company operation in India, the ministry of corporate affairs (MCA) is planning to come up with an e-governance model for all official liquidators (OLs) across the country.
According to a senior MCA official, ?If a company plans to wind-up in India today, it has to wait really long before paper work-related formalities are completed and to avoid this kind of delay in winding-up, 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.?
This would be MCA?s third e-governance venture. Before this, the 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. Ols 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.
In India, a company looking to close its business could be in for a prolonged exercise. 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.
Moreover, the delays in resolving insolvency issues result in physical, financial and human assets of the company losing value over a period of time. Apart from this, the company has to face a risk in investment due to a blockage of capital.