In a move that will help lessen the burden on the National Company Law Tribunal (NCLT), the government has notified the rules for winding up of companies under the companies law.
The Corporate Affairs Ministry has notified the Companies (Winding Up) Rules, 2020, which would be effective from April 1.
Petitions for winding up of companies are subject to various conditions, including thresholds on turnover and paid-up capital.
Akila Agrawal, Partner & Head (M&A) at law firm Cyril Amarchand Mangaldas, said the rules seek to inter-alia reduce the burden of the NCLT by enabling summary procedures for liquidation to be filed with the central government.
"Though the draft rules had made this available only for small companies, the final rules make it available to companies that have assets of book value not exceeding Rs 1 crore; and have not taken deposits beyond Rs 25 lakh or have no secured loans beyond Rs 50 lakh or turnover beyond Rs 50 crore or paid up capital beyond Rs 1 crore.
"A large part of the procedure applicable to regular companies continues to be applicable to the companies that can opt for the summary procedure. It is therefore unclear if the process will be fast tracked merely by shifting the jurisdiction to the central government," she noted.
Currently, voluntary liquidation cases are primarily taken up under the Insolvency and Bankruptcy Code (IBC).
The rules have been notified under the Companies Act, 2013, which is implemented by the ministry.