Cabinet Clears Insolvency Kitty With Corporate Funds

The Union Cabinet today cleared the Companies (Amendment) Bill, 2001, which seeks to establish an insolvency fund where companies, with a paid-up capital of over Rs 10 lakh, would contribute 0.1 per cent of their turnover for rehabilitation of sick companies and protection of assets.

Initially, companies would be required to chip in with only 0.05 per cent of their turnover towards the fund. Along with the insolvency provisions, the government would also move a bill to repeal Sick Industrial (Special Provisions) Act or Sica in the current session of Parliament.

Officials said that the initial corpus of the fund, the modalities of which would be worked out by the department of company affairs, would be around Rs 75 crore.

However, a quick estimate by the Business Standard Research Bureau shows that the corpus could swell to around Rs 400 crore based on a 0.05 per cent provision on the turnover for 2000-2001.

The top 10 corporates will account for nearly 40 per cent of aggregates. Indeed, India