Expert group set up for faster winding up of sick companies

NEW DELHI: The government has set up an expert group to suggest ways to speed up liquidation of sick companies by resolving procedural and legal complexities involved. Winding up a sick entity involves multiple regulations and often faces long-drawn litigation.

The group, which comprises members of ICAI, is expected to suggest streamlining of court procedures and reducing the time frame for winding up a sick company to 2-3 years, said an ICAI official who did not wish to be named.

Liquidation of a sick company is done as per the directions of the high court, which in turn appoints official liquidators to conduct the winding-up operations. The ICAI report is likely to be submitted to the ministry soon.

The government has already taken steps to usher in transparency in the liquidation of companies. Offices of the official liquidators have been computerised and details of liquidation are electronically updated so as to keep all
stakeholders in the know.

According to a government study, winding-up operations in India take an average 10 years. An extended period in winding up sick and unproductive firms is not just a burden for the government, it adds to the uncertainty for workers as well as investors related to the sick entity. Currently, proceedings related to liquidation are handled by multiple forums like CLB, BIFR and the high courts.