SICK COMPANIES

EXCLUSION OF CERTAIN TIME IN COMPUTING PERIOD OF LIMITATION (SECTION 255):

In computing the period of limitation specified for any suit or application in the name and on behalf of a company, for which application for determination as sick company has been made, the period during which the stay order was applicable, shall be excluded.

APPOINTMENT OF INTERIM ADMINISTRATOR (SECTION 256):

The Tribunal shall, within seven days of the receipt of application for revival and rehabilitation –

(a)  fix a date for hearing not later than ninety days from date of its receipt;

(b) appoint an interim administrator to convene a meeting of creditors of the company to be held not later than forty – five days from receipt of the order of the Tribunal appointing him to consider whether on the basis of the particulars and documents furnished with the application, the draft scheme and any other material available, it is possible to revive and rehabilitate the sick company and such other matters, which interim administrator may consider necessary for the purpose and to submit his report to the Tribunal within sixty days from the date of the order. Where no draft scheme is filed by the company, the Tribunal may direct the interim administrator to take over the management of the company; and

(c)  issue such other direction to the interim administrator as the Tribunal may consider necessary to protect and preserve the assets of the sick company and for its proper management.

Where an interim administrator has been directed to take over the management of the company, the directors and the management of the company shall extend all possible assistance and cooperation to the interim administrator to manage the affairs of the company.

COMMITTEE OF CREDITORS (SECTION 257):

The interim administrator shall appoint a committee of creditors with up to seven members with a representative each of every class of creditors.

The number of meetings and its procedure including appointment of chairperson shall be decided by the interim administrator.

The interim administrator may direct any promoter, director or any key managerial personnel to attend any meeting of the committee of creditors and to furnish such information as considered necessary by the interim administrator.

ORDER OF TRIBUNAL (SECTION 258):

After considering the report of the interim administrator, the Tribunal is satisfied that the creditors representing three – fourths in value of the amount outstanding against the sick company present and voting have resolved that –

(a)  it is not possible to revive and rehabilitate the company, The Tribunal shall record such opinion and order that the proceedings for the winding up of the company be initiated; or

(b) by adopting certain measure the company may be revived and rehabilitate, the Tribunal shall appoint a company administrator and cause  the administrator to prepare a scheme of revival and rehabilitation.

The Tribunal may appoint an interim administrator as the company administrator.

APPOINTMENT OF ADMINISTRATOR (SECTION 259):

A database of names of company secretaries, chartered accountants, cost accountants and other professionals who may be appointed as interim administrator or company administrator shall be maintained. The terms and conditions of the appointment of interim and company administrator shall be as ordered by the Tribunal.

The Tribunal may direct the company administrator to take over the assets or management of the company. The company administrator may engage the services of suitable experts for assisting him in the management of the company.

POWERS AND DUTIES OF COMPANY ADMINISTRATOR (SECTION 260):

The company administrator shall perform functions as directed by the Tribunal.

The company administrator may cause to be prepared with respect to the company –

(a)  a complete inventory of –

                      i.        all assets and liabilities of whatever nature;

                     ii.        all books of account, registers, maps, plans, records, documents of title and all other documents of whatever nature;

(b) a list of shareholders and list of creditors showing separately in the list of creditors , the secured creditors and unsecured creditors;

(c)  a valuation report in respect of the shares and assets in order to arrive at the reserve price for the sale of any industrial undertaking of the company or for the fixation of the lease rent or share exchange ratio;

(d)  an estimate of the reserve price, lease rent or share exchange ration;

(e)  pro forma accounts of the company, where no up – to – date audited accounts are available; and

(f)   a list of workmen of the company and their dues referred to in subsection (3) of Section 325.

Now we will discuss Scheme for revival and rehabilitation of sick next blog post.

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