The government is in the process of putting in place a framework that facilitates an efficient regime for corporate rehabilitation and liquidation, Corporate Affairs Minister Prem Chand Gupta said.
“The new Company Law being framed by the government will provide a framework that would allow efficient turnaround as well as quick liquidation process that would help realise the best value for stakeholders and the lenders,” Gupta said.
There is need for an effective system and framework for restructuring, rehabilitation or winding up of companies, Gupta said at the inauguration of a training programme on Insolvency and Restructuring organised by the Institute of Company Secretaries of India and INSOL International.
“When a company is passing through a phase wherein it is unable to utilise its assets efficiently or manage its operations properly, it becomes necessary that remedial measures be initiated to stem the tide. This becomes all the more important when a company had been closed down and all assets are lying unused,” Gupta said.
India does not have a separate insolvency law and the regulatory regime dealing with corporate insolvency is contained in the Companies Act and Sick Industrial Companies (Special Provisions) Act. Experiences have proved that the system does not provide for speedy and effective rehabilitation and efficient exit, he said.
According to a World Bank study, the time taken to wind up a business in India is over 10 years, while the same is 2-3 years in other parts of the world. The recovery is also low, about 13 per cent against 50-60 per cent elsewhere.
Currently assets and economic resources worth thousands of crores are locked in the liquidation process of about 6,200 companies across the country.
ICSI and INSOL International would work together to build a sustainable relationship for benefit of professionals in insolvency and restructuring.