The proposed law on insolvency and the winding up of companies, the draft bill for which is likely to be taken up for discussion by the Cabinet shortly, has ranked pari-passu the claims of employees and creditors of a company in liquidation.
The government told Parliament today on the basis of the recommendations of the high-level committee on law relating to insolvency and winding up of companies and after taking into consideration the views of the group of ministers, the introduction of a bill, namely the Companies (Amendment) Bill, 2001 is at an advanced stage.
The provisions of the proposal include the setting up of a National Tribunal under Article 323 B of the Constitution.
The powers and jurisdiction presently exercised by the Company Law Board, Board for Industrial and Financial Reconstruction, Appellate Authority for Industrial and Financial Reconstruction of India and the high courts are to be entrusted to the Tribunal. The law also proposes to repeal the Sick Industrial Companies Act.
Other provisions include a fund for revival and rehabilitation of companies and preservation and protection of the assets of companies to be created under the control of the central government and professionals to be appointed as liquidators with winding-up steps be completed within the time-frame of two years.
The government plans to prepare a panel of such professionals for their deployment.
The proposal defines the basis for voluntary winding up and revival of companies as debt default to creditors exceeding Rs 1 lakh and erosion of 50 per cent of net worth.
It states that companies with a minimum capital of Rs 10 lakh only to submit winding-up petitions.
