MCA issues draft norms for revival of sick companies

Move precedes replacement of Company Law Board with National Company Law Tribunal

Ahead of setting up the National Company Law Tribunal (NCLT), the government has come out with draft rules pertaining to revival and rehabilitation of sick firms under company law.

As it looks into put in place NCLT and its appellate tribunal, a committee set up by the Ministry of Corporate Affairs (MCA) has prepared these draft norms.

NCLT, proposed under the Companies Act, 2013, would replace the Company Law Board.

The ministry has sought comments on the draft rules with respect to revival and rehabilitation of sick companies related provisions under the Act.

According to the ministry, NCLT and its appellate authority is at an advanced stage of constitution. "After its constitution, it is proposed to commence the provisions relating to revival of sick companies (Chapter XIX) of Companies Act, 2013," it added.

The process of filing of application under Chapter XIX and rules for service of notice or other documents would be as provided in the NCLT, 2016 and the National Company Law Appellate Tribunal Rules, 2016.

Among others, in case a sick company does not submit a draft scheme of revival and rehabilitation, the Tribunal may direct the interim administrator to take over the management of that entity, as per the draft rules.

Comments have been sought on the draft rules till March 14.