Abstract
A Corporation is an artificial juristic person in the eyes of the law. It undergoes an inherent metamorphosis as a part of the business cycle. Despite conflicting view by noted experts, if one draws a human analogy, a corporation too takes birth at incorporation and attains its optimum splendor by wealth maximization. It at times suffers from 'ailing financial health' which is termed as 'corporate insolvency' and just like medication, tools like 'corporate rescue' are used to revive the financial ill health of a corporation. Corporate Insolvency resembles to the state of affairs when a company is unable to pay its debts. Various causes for insolvency include under-capitalization, over-trading, overleveraging apart from others. The legal framework to determine corporate insolvency and its economic analysis reveals three major problems - coordination, ex-ante efficiency and ex-post efficiency. A right balance of incentives and disincentives for ensuring a creditor-debtor friendly insolvency law should be the aim. However, imbalance in these incentives tend to render these laws inefficient. Also, impetus to corporate rescue mechanisms supplement the structure of corporate insolvency law and hence a structured hassle free mechanism should be implemented. On the Indian front, the absence of a single code prescribing mechanisms to deal with corporate insolvency and corporate rescue and the omnipresence of a web of legislations on the same, the efficiency and efficacy of these apparatus gets compromised. India had the Companies Act, 1956, Sick Industrial Companies (Special Provisions) Act, 1985 which has undergone a complete overhaul in the form of the Companies Act, 2013. Especially when India today seeks to increase its 'Ease of Doing Business' Ranking to lure investors a novel corporate insolvency and rescue model needs to be developed by resorting to global convergence in terms of acceptance of best practices from the international fraternity with a economic analysis in order to ensure existence of an efficacious corporate insolvency code. Please note that the said paper was written prior to the enactment of the Insolvency and Bankruptcy Code, 2016.
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Disclaimer: All third-party content on this website/platform is and will remain the property of their respective owners and is provided on "as is" basis without any warranties, express or implied. Use of third-party content does not indicate any affiliation, sponsorship with or endorsement by them. Any references to third-party content is to identify the corresponding services and shall be considered fair use under The CopyrightLaw.