|
India Updates
|
A NEW INSOLVENCY LAW IN OFFING
New Delhi ~ June 21 2001
The Government has decided to introduce a Bill further to amend the Companies Act 1956 to provide for a new Insolvency Law intended to expedite winding up of sick companies. The Bill which is before the Cabinet will be based on the recommendations of Justice V. Balakrishna Eradi Committee Report. It will also take into consideration the views of the Group of Ministers (GOMs). The proposed Insolvency Law will provide for a time bound expeditious and efficient winding up procedure for sick companies in tune with modern global standards under the WTO regimen so that workers promoters and other investors do not have to suffer for a longer period. The existing procedure delays the liquidation of companies. Some of the important reasons for delay are elaborate procedural requirements non-cooperation by ex-directors of the companies, non-filing of statement of affairs by ex-directors to enable Official Liquidators to proceed further and non-service of the notices of complaints filed by the Official Liquidators in courts for filing statement of affairs by ex-directors non-service of notices on debtors even after getting ex-parte decree difficulties facing in tracing the debtors and execution of decree by attachment. Besides considerable time is taken in realisation of dues and settlement of claims including claims of tax authorities workmen and others.
The high level committee on law relating to insolvency and winding up of companies has recommended setting up of a national company law tribunal with power and jursidiction presently exercised by Company Law Board (CLB)/BIFR/AAIFR/High Courts repeal of the Sick Industrial Companies (Special Provisions) Act 1985 (SICA) enunciation of principles under Orderly and Effective Procedures proposed by International Monetary Fund (IMF)
application of UNCITRAL Model Law as adopted by the United Nations to cases of cross border insolvency encouraging voluntary winding up of companies companies with a minimum capital of rupees ten lakh only to be eligible for submitting winding up petitions basis of voluntary winding up and for revival of companies to the national company law tribunal with a debt default to creditors exceeding rupees one lakh and erosion of 50 per cent of net worth pari-pasu ranking of claims of employees and secured creditors of company strengthening and modernization of offices of the Official Liquidators creation of a fund for revival rehabilitation of companies, preservation and protection of the assets of companies under the control of Central Government completion of winding up steps within a maximum time frame of two years adoption of administrative order procedure prevalent in the United Kingdom to expedite winding up and appointment of professionals as liquidators through a panel of such professionals to be prepared by the Government.
|
