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Topic : Essentials for Corporate law
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By : Prathamesh Toraskar, Legal Consultant
Industry : Law Functional Area : Business Models
Activity:  0 comments  842 views  last activity : 07 06 2010 20:18:04 +0000
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In general, it is almost impossible to have or conceive a business which is completely insolvency free. Laws relating to corporate insolvency and restructuring seek to serve several objectives, namely, to restore the debtor company to profitable trading where this is practicable, to maximize the return to creditors as a whole where the company itself cannot be saved,  to establish a fair and equitable system for the ranking of claims and the distribution of assets among creditors, involving a redistribution of rights, and finally to provide a mechanism by which the causes of failure can be identified and those guilty of mismanagement brought to book, and where appropriate, deprived of the right to be involved in the management of other companies.

And everybody knows that the legal framework for businesses to enable sustainable economic reform having focus on emerging economic scenario, good corporate governance and protection of the interests of the stakeholders, including investors, need efficient and speedy procedures for exit as much as for start up. World over, insolvency procedures help entrepreneurs close down unviable businesses and start up new ones. This ensures an overall economic growth. Even though India has made much progress on economic reform since 90's, the economy is still limping by excessive rules and a powerful bureaucracy with broad discretionary powers which often goes against the general interests of business.

Although the Indian insolvency law which has been an ardent follower of the UK insolvency laws, yet, while the UK has moved to a consolidated insolvency law, the similar well directed move is not forthcoming. Much has been said and done to bail out corporate insolvency and restructuring process in order to make the laws which are "efficient" and "effective'., numerous law making processes deliberated in recent years involving law makers, professionals and different interest groups, yet, for reasons unknown, the requisite teeth is still missing. It is wondered as to how a just less than a month is needed to register a business in India, but when it comes to winding up and revival of a company, it can drag as long as 10 years or even more in "appropriate" case.
 
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