Limit set for firms' closure

JJ Irani Panel recommends two-year timelimit for winding up of companies

The JJ Irani panel on companies law reform has informally decided on introducing a two-year time limit on winding up of companies. The company law, as it stands today, does not specify a time-limit and the closure proceedings drag on for years.

The limit currently specified is applicable only in the case of a sick industrial company. The winding up has to be concluded within one year of the issuance of the order as per the amendment introduced in 2002.

This amendment relates to winding up by the National Company Law Tribunal (NCLT) which has not yet been formed as the petition on its formation is pending before the Supreme Court.

The NCLT is supposed to take over matters relating the winding up once it is set up. Being a dedicated tribunal on corporate matters with benches in major cities, it is expected to reduce the time taken in winding up cases where at present high court supervision is required.

The Irani panel is working to make the companies law more effective with focus on five major areas""incorporation, merger and acquisitions, audit and investigations, corporate governance and winding up.

Five sub-committees are working on these specific areas. A decision on whether the Irani committee term needs to be extended is expected to be taken up by the end of this month. Currently, it is meeting four to five times a month.

The panel is also considering whether there can be a separate set of provisions for companies above a certain size keeping in mind the fundamental principle that the law has to be same for everybody.

The provisions relating to mergers and acquisitions are also being simplified as it is felt that companies should be able to spin off separate companies or amalgamate easily.

The committee is also deliberating on how information technology can be used to make compliance and enforcement of company law effective. Suggestions on this issue are expected to form a part of the report.

With the launch of the MCA - 21 project on computerisation of the Registrar of Companies offices which facilitates online filing, the new companies act would incorporate suitable provisions to make the law effective.

The approach of the Irani panel is to critically examine major provisions from the point of view of lifecycle of a company and make the "birth, marriage, divorce and death" of a company easy while ensuring effective supervision.

Simplifying company law

• The company law as its today does not specify a time limit for winding up of a firm and the proceedings drag on for years making closure an ordeal
• National Company Law Tribunal would take over the winding up related matters, instead of the high court
• The provisions relating to mergers and acquisitions are also being simplified as it is felt that companies should be able to spin off separate companies or amalgamate easily
• The panel is also deliberating on how information technology can be used to make compliance and enforcement of company law more effective