Fear of losing control over their companies has prompted promoters to settle dues
By H.P. Ranina/ NRI Problems
Question: The Insolvency & Bankruptcy Code was introduced more than five years ago. Has it helped in banks and financial institutions recovering their dues and companies being saved from liquidation?
ANSWER: IBC which was introduced seven years ago has had a salutary effect and ensured timely repayment of dues to banks and financial institutions. The fear of losing control over their companies has prompted promoters to settle dues with banks and financial institutions. When a debtor has defaulted, creditors are entitled to approach the National Company Law Tribunal for initiating bankruptcy proceedings. According to a recent report, while 7,300 cases have been admitted by the NCLT, almost four times that number (27,500) of debtors settled their pending disputes to prevent the creditors from approaching the Tribunal. These debtors arrived at a resolution of their disputes just before the creditors were about to file an application with the NCLT. The reason is that once the NCLT admits an application which has been filed by a bank, a resolution professional needs to be appointed by the creditors. On such appointment, the directors and promoters lose control over the affairs of the company and are debarred from its management. To prevent this from happening, promoters take urgent steps to resolve the dispute and come to a settlement. Thus, the IBC has played a crucial role in saving companies from going into liquidation, protecting the jobs of hundreds of thousands of employees and ensuring that all creditors, big and small, recover their dues.
Question: I am working for an American multinational company in the UAE. The company is proposing to start a GCC in India. The parent company is also considering options of setting up such a unit in Vietnam. What has been the experience of other companies which have set up base in India?
ANSWER: Global Capability Centres were started In India more than twenty years ago to provide accounting services, business consultancy and IT support to the parent company. GCCs have now matured and most of the well known MNCs have set up large centres employing more than 10,000 technical personnel. Entire functions and product ownership are now shifted to India. In fact, these GCCs are now providing the intellectual leadership for some of the largest global enterprises. The main object of setting up the GCC in India is to have access to the digital talent available in the country. Some Japanese companies have formulated an innovative approach for product development to meet their evolving needs. The technical team in India comprises of platform engineers, backend engineers and mobile developers. In short, the GCCs in India are no longer involved in routine back office operations. Global companies are setting up base in India for complex work, more sophisticated operating models with the object of modernizing the tech stack and creating new business capabilities. Thus, GCCs are taking on more leadership roles in order to prepare for the future.
Question: While education is one of the top priorities of the Indian Government, millions of educated youngsters are finding it difficult to get jobs. How is this explosive issue being tackled by the Government?
ANSWER: The Education & Skill Development Ministry has launched an initiative to give a fresh impetus to skill development for the educated youth. A number of well known and multinational companies have been encouraged to team up with educational institutions. These collaborations are expected to provide a comprehensive and result oriented strategy for enhancing the skilling ecosystem. The partnership between industry and the academia is part of the Skill India Mission which will build a capable, productive and technically savvy workforce. Many digital initiatives have been launched for skilling, reskilling and upskilling by leveraging technology. Therefore, apart from addressing the problem of unemployment, the Indian workforce will be able to meet not only domestic demand but also set new benchmarks for sustaining the global demand for skilled manpower. The partnership between industry and educational institutions is meant to allow the academically educated to grasp the complexities of modern business, acquire skills and extract valuable insights from real world situations.
H. P. Ranina is a practising lawyer, specialising in tax and corporate laws of India.