A senior MCA official told FE, In order to have a faster and transparent winding up system, the ministry is concentrating on having a project which would facilitate easy exit for management and other stakeholders.
The ministry will incur expenditure on the infrastructure of the official liquidators offices. For this, the ministry has submitted a scheme to the Planning Commission to provide funds for the improvement of offices of liquidators across the country. The ministry is also planning to come up with an e-governance model for all official liquidators in India as the present system has various inadequacies like a poor record system and process management by official liquidators, an MCA official said.
According to a World Bank report, the average time taken in the disposal of cases winding up in high courts is 10 years and the recovery rate too, is very low.
In India , against the 28 benches of high courts, there are only 16 offices of official liquidators, which exist to assist the high courts.
Winding up takes place under the supervision of a high court, under the provisions of the Companies Act, 1956. During the winding up of the company, an official liquidator is appointed by the high court, who is an official of the MCA, but works as per the directions of the High Court.
Before this, the ministry had launched two simplified exit schemes in 2003 and 2005 to identify and strike off the names of such companies.
About 52,000 companies were struck off in 2003. In 2007, action for striking off names was also initiated for companies who had not been filing their mandatory documents for over three years continuously. Another 50,000 companies were struck off from the list.
Due to the slow winding up procedure in India , the capital invested in the companies gets blocked, which is a big drawback for corporates.
Delays in resolving insolvency issues result in physical, financial and human assets of the company losing value overtime.