New Law to Ease Insolvency Process
Apr. 6 – A new separate law on insolvency proceedings may help make it easier for companies wanting to close down operations; specifically cutting the process for small and medium enterprises.
The proposal will cover insolvency provisions for companies, partnerships, sole proprietorship firms and limited liability partnerships. “Speedy winding up of sick enterprises, particularly small and medium ones, is an area we need to improve,” a senior official in the ministry of corporate affairs told The Economic Times. A separate law just for insolvency proceedings will make the process more effective and allow companies to conclude affairs faster. Currently, the liquidation process in the country is found under the Companies Act. The process typically takes 7 to 10 years compared to the standard 1 to 6 years in other countries; dragging on proceedings longer than necessary and wasting resources. “What is required is a need for comprehensive assessment in cases of small and medium enterprises. I think a standalone insolvency law will be required in the years ahead,” insolvency lawyer Sumant Batra and president of the U.K.-based International Association of Restructuring and Insolvency Professionals told The Economic Times.
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