Draft Act for fast exit of foreign firms from JVs

The ministry of company affairs is drafting a Liquidation Act that will help foreign partners make a smooth exit from joint ventures that are on the verge of extinction.

However, it would take some time for the draft to become an Act as the proposal has to be tabled in Parliament for approval.

"We are working on the liquidation Act that will help partners make a faster exit in case a company is being wound-up. We are looking at a shorter exit period, with formalities not lingering on for more than three years," MCA Secretary Komal Anand told reporters here today.

This will be a much more enabling Act and will be based on disclosures and transparencies. The ministry will also consider bringing out a Competition Act along with this Bill.

The Liquidation Act will enable a company to disintegrate a JV if it has become unviable to continue running it, within 12 months. It will hasten this process, with a maximum time-frame of around three years, compared to the present 11-15 years, Anand said.

At present, approvals for liquidation are provided by high courts and the Board for Industrial and Financial Reconstruction (BIFR).

The National Companies Law Tribunal (NCLT), which is being formulated, will lay the foundation for the Liquidation Act. NCLT is also slated to take over the responsibilities of the BIFR and the high courts.

The Act will be an extension of the simplified exit scheme of 2005 that presented defunct companies with an opportunity to get their names removed from the registrar of companies (RoC), through a simplified procedure under the Companies Act of 1956. The scheme ran from February 1 2005 to July 31 2005.

Meanwhile, the e-governance initiative of the ministry, MCA-21, was launched in Mumbai today.

The Rs 343-crore MCA-21 project, which is being jointly implemented by Tata Consultancy Services, envisages computerisation of all RoCs to enable e-filing and online access of documents by companies.