Soon, Liquidation May Fetch More

A rule that kept bankrupt businesses on life support is on its way out, promising speed, transparency, and better liquidation value.

- Krishna Yadav

India's bankruptcy rule maker recently proposed to drop the clause that allows keeping a company in liquidation as a going concern—essentially, a business that can operate and meet its obligations. While the provision intended to save jobs and preserve value, it merely encouraged lawsuits, attracted tainted owners, delayed liquidation, and depressed asset values, lawyers said.

"The proposed change will bring down costs by eliminating both the largely futile attempt of keeping the corporate debtor as a going concern and the process of finding a buyer, thereby positively impacting creditor recoveries," said Manmeet Singh, a partner at Cyril Amarchand Mangaldas.