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

The business entities in India are confronted by changing circumstances attributable to variation in the governmental policies and ever-growing competition requiring them to opt for corporate restructuring to maximize their profitability. In furtherance to fulfilment of the said purpose two or more enterprises may come together sharing their liabilities, responsibilities, assets and trade objectives.

Merger… A corporate restructuring

Leasing of aircrafts is a prevalent market practice in the aviation industry, and all existing airline operators in India have currently leased a significant number of aircrafts in their fleet. In fact, a sizeable debt in the books of these operators is in connection with such leasehold arrangements.

India is increasingly becoming one of favoured business destinations on the international scale. This is attributable to a number of factors including the schemes and policies introduced by the Government from time to time. One of the major reasons for the improvement of the country’s position in the parameter of ‘Ease of Doing Business’ is the development of an efficient insolvency and bankruptcy resolution mechanism.

Insolvency and Bankruptcy Resolution

The NCLAT has held that without initiating Corporate Insolvency Resolution Process (CIRP) against the principal borrower, financial creditor can initiate CIRP against the Corporate Guarantors.

It noted that as per IBC Section 5(8)(h), counter-indemnity obligation in respect of a guarantee comes within the meaning of a ‘financial debt’.

​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').