New Liquidation Process for Troubled Firms to be Released

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May 7 -The Indian government has announced plans to formulate an exit scheme that will make it easier for troubled companies to go through the liquidation process.

The mechanism is scheduled to be ready in less than a year and will serve as a special purpose vehicle (SPV) that will allow authorities to centrally gather and access data to cut procedural delays. The liquidation process for a company in India can be a tedious task taking up to 10 years to finish following current rules. This only serves to further devalue company assets and hampers efforts to re-channel remaining assets back to the economy.

“The proposed SPV will create an in-house system of data management and coordination to minimize excessive dependence on private vendors,” an official with the ministry of corporate affairs told the Economic Times.

The new electronic scheme will work as an independent in-house system for managing data.

According to the World Bank Group’s Doing Business 2010, India ranks 138th out of 183 economies in terms of closing a business. This was an improvement from the previous year where the country ranked at 142nd place in terms of the time and cost required to finalize corporate bankruptcies.

The ranking was based on weaknesses in existing bankruptcy laws and main procedural and administrative bottlenecks in the bankruptcy process.