NCLT may be free to sell sick companies' assets

NEW DELHI: THE government has proposed to allow the National Company Law Tribunal to dispose of some assets belonging to sick industrial units ahead of finalising a scheme for rehabilitating companies in the amended Companies (Amendment) Bill ‘01.
This means if the NCLT feels the disposal of some assets is necessary even as it is considering a scheme of rehabilitation and revival of a unit, the tribunal can, during the course of inquiry allow the sale of certain assets.
This is a significant shift from the provisions of the original bill introduced in Parliament in August ‘01 which stated that asset-stripping of sick units should be avoided.
The original bill states that the tribunal could direct a company not to dispose of any assets during the period of preparation or consideration of the rehabilitation scheme.
The NCLT would also be empowered to direct the company to hold an extraordinary general meeting to seek shareholders clearance to issue fresh shares at a discount in the scheme of rehabilitation and revival of the company.
The NCLT will have the power to direct convening of the EGM concurrently with the central government, according to the amendments to be incorporated in the bill currently in the House.
These provisions are being included in the Companies (Amendment) Bill, ‘01, which is currently in the House, on the recommendation of the standing committee on home affairs chaired by Pranab Mukherjee.
The Union Cabinet had cleared these changes in the bill in the meeting held early this week. The DCA will soon move the provisions. The government has decided to transfer power pertaining to reduction of share capital to the NCLT.
This provision had not been incorporated in the ‘01 bill.
At present, companies have to seek clearance of the high court under section 100-103 of the Companies Act, 1956, to reduce its share capital after being authorised by a special resolution of its shareholders.