Central Government: Government companies go to bankruptcy court to close loss-making units

The government has said that government companies should go to bankruptcy court to wind up loss-making enterprises. This will speed up the solution. The government wants to reduce its holding in these companies. Resolution of a loss-making company has to file an application for insolvency process under the Insolvency and Bankruptcy Code (IBC) within three months of getting approval from a committee of top cabinet ministers, according to a directive issued on Monday.

The government is looking to shut down loss-making units for nine months from the day the firm seeks approval. The boards of the parent companies have been asked to segregate the land assets of their subsidiaries to ensure that land disputes do not come in the way of shutting down the units. The firms have also been asked to write off any compensation due from the state governments for the leased land.

Can select an option under the current rule

The government said state companies can opt for the closure of units by approaching the corporate affairs ministry. At present, such is the rule. This will help in reducing government companies. The government is continuously reducing their number through disinvestment.

Introduced two new options for the appointment and removal of independent directors

The Securities and Exchange Board of India (SEBI) has introduced a new option for the appointment and removal of independent directors on the board of directors of companies. Under the new option, two criteria can be adopted for the appointment and removal of independent directors. The resolution was passed by a simple majority and a majority of minority shareholders.

Presently, the appointment, reappointment, or removal of independent directors is done through a special resolution. A 75% vote in support from the board of directors is required for the special resolution to pass.

According to SEBI, the Listing Obligations and Disclosure Requirements (LODR) rules have been amended to give effect to the new option. In the alternative arrangement, new criteria can be adopted if the special resolution does not get the required majority for the appointment of independent directors.

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