Following are the various modes for existing business in India –
- Transfer of shares for exiting business in India
- Voluntary Liquidation in Existing Business in India
- Winding up by the National Company Law Tribunal when Exiting Business in India
- Other Options for Exiting Business in India
This article discusses all of the above mentioned points in greater detail-
Transfer of shares for exiting business in India
1. Legal provisions governing transfer of shares
The enactment of the Insolvency and Bankruptcy Code, 2016 (IBC) has been often cited as one of the key economic reform of the present government . Undoubtedly the new enactment resulted in large corporate entities queuing up to acquire distressed companies and their assets, put on block following initiation of IBC proceedings, thereby infusing efficiencies in the economy due to likely revivals of such companies .
Introduction
The division bench of the Supreme Court of India (Supreme Court) comprising of Hon’ble Justice Mr R.F. Nariman and Hon’ble Justice Mr Vineet Saran, in its judgment dated 30 April 2019 in J.K. Jute Mill Mazdoor Morcha v Juggilal Kamlapat Jute Mills Company Ltd & Ors has held that a trade union is an operational creditor for the purpose of initiating the Corporate Insolvency Resolution Process (CIRP) under the Insolvency and Bankruptcy Code, 2016 (IBC).
Brief Facts
It is now a settled position that the prime objective of the Insolvency and Bankruptcy Code, 2016 (“IBCâ€) is resolution or revival of the Corporate Debtor; followed by maximising the value of the assets of the Corporate Debtor; and lastly to promote entrepreneurship and availability of credit. The proceedings under the IBC are not intended to substitute recovery proceedings.
The Reserve Bank of India (“RBI”) has issued the Reserve Bank of India (Prudential Framework for Resolution of Stressed Assets) Directions, 2019 (“New Framework”) on June 07, 2019[1] in which the RBI has continued the core principles of its circular dated February 12, 2018 (“February 12 Circular”) and has added provisions encouraging both informal and formal restructuring in India.
I. Institutional changes
In as much as the Government has been in the consistent process of encouraging business operations in the nation, it also has the objective to create more transparent and systematic mechanism ensuring time bound manner and for maximization of the value assets. One of the major challenges faced by the modern commercial sector is the reposition of faith of the creditors who put their hard-earned investments at the fate of the success of the business transactions undertaken.
Resolution Procedure
In order to facilitate the smooth conduct of business transactions the Government has put in numerous efforts in the form policies and regulations. While the greatest threat posed to the lenders in the modern market operations is the impact of non-performing assets or bad loans. In order to maximize the value assets in a time bound manner, the Government enforced the Insolvency and Bankruptcy Code, 2016 (hereinafter referred to as the 'IBC').
The Government has been working to facilitate the conduct of business in the country, thereby permitting a rapid boost to the Indian economy. Attributable to multiple factors such availability of multiple resources, friendly regulatory mechanism, easy availability of labour, has contributed towards the growth of the industrial sector. Numerous efforts made by the employees of the business corporates have accelerated the pace of development in the nation.
Labour welfare
The best practices in business require the establishment faith of fulfilment of obligations by the transacting parties. However, change in circumstances may often hinder the proper discharge of the duties undertaken by the parties. Situations such as insolvency and bankruptcy of one party not only obstruct the desired performance of the agreed promises but render the other party helpless for the losses it may suffer to that account.
Monitoring regime