Process of liquidating a company
Liquidation and Rehabilitation 7.1 The Insolvency law should strike a balance between rehabilitation and liquidation.
It should provide an opportunity for genuine effort to explore restructuring/ rehabilitation of potentially viable businesses with consensus of stake holders reasonably arrived at.
6.2 Corporate insolvency should be addressed in the Company Law.
There is no need of a separate Insolvency Law for the present.
When the company directors realise the company does not have a reasonable prospect of survival, they are obliged by the Company’s Act to put the company into liquidation.
The company should cease trading in a timely manner and, to protect all creditors including employees and shareholders, appoint a liquidator.
Similarly, conversion to liquidation might be appropriate even after a rehabilitation plan has been approved if such a plan was procured by fraud or the plan can no longer be implemented.
It is, therefore, essential to provide for a sound framework for restructuring and rehabilitation of companies along with a framework for winding up and liquidation.