Building the institutions of market can help the mergers and acquisitions (M&As) process to move faster, chairperson of the Insolvency and Bankruptcy Board of India (IBBI), M.S. Sahoo said at an ASSOCHAM event held in New Delhi today.
"We have not completely moved to market model as of now but IPO is a complete model hub market, takeover almost, I think if we can build institutions of market probably that will all help the M&As to move faster," said Sahoo while addressing an ASSOCHAM conference on M&As.
Highlighting how the M&A resolution process should be in hands of market participants, he said that the Insolvency and Bankruptcy Code (IBC) has segregated the commercial aspects of insolvency from judicial aspects.
"The IBC has put the commercial aspects in hands of stakeholders and judicial aspects with tribunal and with all that it has put a timeline with firm consequences," added Sahoo.
"It says that if you do not do that in 180 days time, the company will compulsorily go into liquidation," he added.
The IBBI chief further said that M&As are very important activities for economies of scale, economies of scope, from micro and macro point of views and it affects the rights and interests of two sets of people.
"It does readjustments of rights of financials of an enterprise, equity holders or debt holders and it also affects the rights of the consumers of the products produced by an enterprise," he said.
Talking about three very high level principles in M&A sector, Sahoo said, "It should gel well with current reforms of last three years in Indian economy whereby we have almost moved on many matters so that decisions are taken by the parties themselves not by any third person, government or court."
Besides, considering the era of 'minimum government and maximum governance,' he said, "We are looking at stakeholders who stand to lose or gain from the transaction only they should take decision, they should have incentive, motivation to do it in an orderly manner and complete it in a time-bound manner."
He also talked about the need for conducive regulations to ensure that parties do as much as required and no more. "That means have the regulations which address the problem precisely and does not do beyond what is required."
He further said that merely making rules and regulations is not adequate unless there are facilitators in the system.
"Since 1992 we have been talking about economic liberty but we are yet to build very sophisticated institutions for promotion and protection of this liberty," said Sahoo.
Adding that there should be facilitators which allow people to undertake the transactions with the capacity in the system, the IBBI chief stressed upon the need for valuers which act as an institution in all commercial transactions.
"The system must provide valuers who will help in transactions and all other elements of the ecosystem must have the institutional capacity and motivation to help these transactions," said Sahoo.
He said that to the extent possible we now enable the market participants take decisions for themselves and take responsibility for their decisions.
"We are looking at such regulations and facilitations, regulations essentially to protect interests of various stakeholders while in case of acquisitions we look at the people who would be exiting they get a fair opportunity to exit and exit at the highest possible price and all those who exit they get the same price but with least disruption to business," he added.
He also said that there must be enough legal protection, clarity for those coming in, least possible financial and regulatory burden with tax and it should be completed in an orderly and time-bound manner and not linger for years.
"We have allowed to a large extent, let the market decide what is good for them, let us put the entire process at their disposal, let them have enough motivation to do it and let them do it in a time-bound manner, the rest of mechanism are there to create a very congenial market environment, create a very conducive regulation and there is no infringement, no cutting corners and no compromises but only keep a watch on that," further said the IBBI chief.
In his address at the ASSOCHAM conference, Amardeep Singh Bhatia, joint secretary in Ministry of Corporate Affairs said that more benches and members would be joining the National Company Law Tribunal (NCLT) and National Company Law Appellate Tribunal (NCLAT).
"As the load is increasing, the responsibilities of NCLT and NCLAT have been increased, the capacity also is proposed to be increased," said Bhatia.
"Increase in capacity is a work in progress and that will happen over the course of next couple of months and you will have more benches, more members joining in," he added.
He said that creation of national company law tribunals is the foremost thing that has happened as the cases have shifted from courts. "That is a huge change as it provides the opportunity to all the professionals, it has widened the scope for chartered accountants and company secretaries to practice before the tribunal."
He also said that the tribunals have also been entrusted with the responsibility of ensuring that the processes are completed in an efficient manner. "We have had an experience of almost an year of how the tribunals have been functioning, although the merger cases got transferred only after December last year but there is still a lot of scope for improvement.
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