Companies must be allowed to exit honourably so that they can make a fresh start and there should not be any stigma attached to genuine business failures, the chief of the insolvency regulator said on Friday.
When a company fails for any reason and wants a quick exit, this is when the Insolvency and Bankruptcy Code (IBC) comes in handy, Ravi Mittal, chairman of the Insolvency and Bankruptcy Board of India (IBBI), said. The insolvency regime in India is still in its nascent stage, he said, calling for more steps to make it more effective.
“In any developing economy, we want the private sector to invest and if it does so, it will have to take the risk. And if it takes the risk then some failures are bound to happen. This failure could be due to mismanagement, internal factors or could be external because of environmental factors. In such cases, there should not be any stigma attached to failure,” Mittal said.
He was speaking at an event organised by the IBBI, as part of the iconic week celebrations of the Azadi ka Amrit Mahotsav.
The IBC promises a market-driven and time-bound resolution of toxic assets, thus offering stressed firms the freedom to exit. However, delays caused by litigations and bottlenecks in the adjudicating system have resulted in low recovery.
Speaking on this occasion, corporate affairs secretary Rajesh Verma said, with the enactment of the IBC in 2016, stressed companies got an opportunity for honourable exit. Stressing that an effective bankruptcy framework is an important pillar for an economy like India, he said markets need freedom broadly at three stages – to start a business (free entry), to continue the business (free competition) and to shut the business (free exit).
CCI chief flags regulatory challenges in e-commerce
Competition Commission of India (CCI) chairman Ashok Kumar Gupta highlighted the importance of entrepreneurial liberty but, at the same time, flagged growing challenges for lawmakers and regulators due to the tectonic shifts in markets following the emergence of digital and e-commerce players.
This shift is compounding challenges as to how to address the consequent bargaining power imbalance and information asymmetry between platforms and their business users.
The CCI has reportedly been seeking more power to prevent anti-competitive practices in the growing e-commerce sector in India, which sees frequent confrontations between the offline and online retailers.