distressed companies

8/17/2019 Distressed Companies

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CHANAKYA NATIONAL LAW

UNIVERSITY

DISTRESSED COMPANIES: LAST HOPE

CORPORATE LAW II

FACULTY- MRS. NANDITA S. JHA

ANUBHUTI VARMA

ROLL-721

8 TH SEMESTER

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ACKNOWLEDGMENT

I’m thankful to MRS. NANDITA S. JHA for her able guidane throughout the making of thi!

"ro#et$ %"eial thank! to m& friend! for their a!!i!tane and muh needed hel"$ Thank &ou one

and all$

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RESEARCH METHODOLOGY

SUBJECT' Cor"orate La( II

TOPIC' Di!tre!!ed Com"anie!' La!t )o"e

OBJECTIVES: To a!ertain the re*i*al and rehabilitation mehani!m for !ik om"anie! b& (a& of

takeo*er$

RESEARCH METHODOLOGY: Dotrinal re!earh methodolog& ha! been u!ed$ Kee"ing the

ob#eti*e! in mind+ material (a! olleted (ith the hel" of different book! and then it (a! om"iled to

make the theoretial "art of the "ro#et$ %eondar& !oure! (ere al!o utili,ed in order to om"lete theob#eti*e$

RESEARCH TOOLS: The re!earh of thi! "ro#et (a! arried (ith the hel" of the Internet and Librar&

of Chanak&a National La( -ni*er!it&$

FOOTNOTING STYLE: In (hole of m& "ro#et uniform footnoting !t&le ha! been ado"ted$

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CONTENTSINTRODUCTION........................................................................................................... 5

TAKEOVERS UNDER THE SCHEME OF REVIVAL AND REHABILITATION.........................7

!" E#$%&$'($ )* +,$ ()'($+ )* +/$)0$%...............................................................7

!!" O$(+ )* +/$)0$%............................................................................................ 8

!!!" K!'4 )* +/$)0$%.............................................................................................

!0" L$&6 $(+ )* +/$)0$%..............................................................................11

TAKEOVER AND ACUISITION OF MINORITY INTEREST.............................................12

"T/$)0$% )* U'6!+$4 '4 C6)$6 H$64 C)#'!$............................................12

" T/$)0$% B!4...................................................................................................19

("F!%'$ )* +/$)0$% !4...................................................................................194"T/$-)0$% O$% +) $ *%)'+ S!'&6$ C)#'.....................................................15

$"A4$;


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INTRODUCTIONThe inidene and magnitude of ill effet! of !ikne!! and the re!ultant lo!ure of indu!trial

om"anie! !uh a! lo!! of "rodution+ lo!! of em"lo&ment+ lo!! of re*enue to the entral and!tate Go*ernment and loking u" of in*e!tible fund! of bank! and finanial in!titution!+ (a! a

matter of !eriou! onern to the Go*ernment$ It (a! reogni,ed that in order to full& utili,e the

"roduti*e indu!trial a!!et!+ to afford ma.imum "rotetion of em"lo&ment and o"timi,e the u!e

of the fund! of bank! and finanial in!titution!+ it (ould be im"erati*e to re*i*e and rehabilitate

the "otentiall& *iable !ik indu!trial om"anie! a! /uikl& a! "o!!ible$ )o(e*er+ the multi"liit&

and om"le.it& of la(! and agenie! "re!ent made the ado"tion of a o0ordinated a""roah in

dealing (ith !ik indu!trial om"anie!+ diffiult$

It (a! reali,ed that the mea!ure!+ till then ado"ted b& the go*ernment+ *i,$ nationali,ation or

takeo*er of management+ had not been able to ahie*e the de!ired re!ult!$ 1oth the!e mea!ure!

needed "eriodi and on!tant finanial and other !u""ort$ In !"ite of all the "o!!ible in*e!tment

and !u""ort+ man& !ik indu!trial undertaking! did not !ho( an& !&m"tom! of *iabilit&$ A large

number of undertaking! did not beome health& in !"ite of their management being ontinued

(ith the Go*ernment or a Go*ernment nominated agen& for !e*eral &ear! a! huge !um! of

mone& (ere re/uired to meet their "a!t liabilitie! of un"aid (age!+ ta.e!+ dutie! et$+ and for

(orking a"ital$ )ene+ e*en the !ik indu!trial undertaking! (ho!e management (ere taken

o*er (ere fored to be (ound u"$

Therefore timel& and ad*ane mea!ure! !hould be taken either b& legi!lation or b& admini!trati*e

order! and mahiner&+ to kee" a !trit *igil on the !&m"tom! of or"orate !ikne!! (ith "artiular

referene to !uh om"anie! a! are "rone to an& kind of or"orate !ikne!!+ !o that "re*enti*e

and remedial mea!ure! an be taken before a om"an& goe! !ik$ A need (a! therefore felt+ to

enat in public interest + a legi!lation to "ro*ide for timel& detetion of !ikne!! in indu!trial

om"anie! and for e."editiou! determination b& a bod& of e."ert! of the "re*enti*e+

ameliorati*e+ remedial and other mea!ure! that (ould need to be ado"ted (ith re!"et to !uh

om"anie! and for enforement of the mea!ure! on!idered a""ro"riate$ 1a!ed on the

reommendation of a Committee of E."ert! under the Chairman!hi" of %hri T$Ti(ari+ the

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Go*ernment enated a !"eial legi!lation named a! the %ik Indu!trial Com"anie! 2%"eial

3ro*i!ion!4 At+ 5678 ommonl& kno(n a! %ICA$

The 1oard of Indu!trial and 9inanial :eon!trution 21I9:4 and the A""ellate Authorit& for

Indu!trial and 9inanial :eon!trution 2AAI9:4 (ere al!o e!tabli!hed in 567; to look after the

matter! o*ered under the "ur*ie( of %ICA$ %ICA (a! further amended in 5665 to bring

go*ernment om"anie! under it! "ur*ie( and again in 566< ertain hange! (ere brought out in

the at for the determination of indu!trial !ikne!!5$

The legi!lation (a! "redominantl& remedial and ameliorati*e+ in !o far a! it em"o(ered the /ua!i

#udiial bod&+ the 1I9: to take a""ro"riate mea!ure! for re*i*al and rehabilitation of "otentiall&

*iable !ik om"anie! and for li/uidation of non0*iable om"anie! and (a! regulator& onl& to a

ertain e.tent$ The latter a!"et (a! refleted in the "ro*i!ion! of the At "ro*iding for

obligation of !ik indu!trial om"anie! and "otentiall& !ik indu!trial om"anie!+ to make

referene to the 1oard and treating an& non0om"liane a! a "uni!hable offene$

1 T,$ T!@%! C)##!++$$ )' R$,!6!++!)' )* S!(/ U'!+ @ ()'+!+


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TAKEOVERS UNDER THE SCHEME OF REVIVAL

AND REHABILITATION

(i) Emergene !" #$e !ne%# !" #&'e!er

Cor"orate %etor i! an attrati*e medium for arr&ing on bu!ine!! a! it offer! lot! of benefit!$

:ai!ing mone& from "ubli ha! it! o(n "o!iti*e feature! and it hel"! !etting u" big "ro#et!$

When "romoter! of a om"an& de!ire to e."and+ the& take a /uik *ie( of the indu!trial and

bu!ine!! ma"$ If the& find there are o""ortunitie!+ the& (ill al(a&! &earn for a"itali,ing !uh

o""ortunitie!$ Com"ared to the effort! re/uired+ o!t and time needed in !etting u" a ne(

bu!ine!!+ it (ould make !en!e to them to look at the "o!!ibilitie! of a/uiring an e.i!ting entit&$

While the "o!!ibilit& of takeo*er of a om"an& through !hare a/ui!ition i! de!irable for

ahie*ing ertain !trategi ob#eti*e!+ there ha! to be (ell defined regulation! !o that the intere!t!

of all onerned are not #eo"ardi,ed b& !udden takeo*er threat!$ In thi! "er!"eti*e+ if one (ere

to anal&!e+ it (ould be lear that there ha! to be a !&!temati a""roah enabling and leading the

takeo*er!+ (hile !imultaneou!l& "ro*iding ade/uate o""ortunit& to the original "romoter! to

"rotet = ounter !uh mo*e!$ Thu!+ (hile the a/uirer !hould a di!i"line method (ith "ro"er

di!lo!ure of intention! !o that not onl& the original "romoter! (ho are in ommand are

"roteted but al!o the in*e!tor!$ It (ould be in the intere!t of all onerned that the takeo*er i!

arried out in a tran!"arent manner$

When ade/uate hek! and balane! are introdued and en!ured+ takeo*er beome! a good tool$

That i! the rea!on (h& regulation! ha*e been "ut in "lae and the!e regulation! re/uire !uffiient

di!lo!ure at e*er& !tage of a/ui!ition$ The!e regulation! take !o muh are that the& o*er not

onl& the diret a/ui!ition of the a/uirer but al!o inlude a/ui!ition! through relati*e! and

a!!oiate! and grou" onern!$

In India+ the "roe!! of eonomi liberali,ation and globali,ation u!hered in the earl& nineteen

ninet&’! reated a highl& om"etiti*e bu!ine!! en*ironment+ (hih moti*ated man& om"anie! to

re!truture their or"orate !trategie!$ The re!truturing "roe!! led to an un"reedented ri!e in

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!trategie! like amalgamation!+ merger! in re*er!e merger!+ demerger!+ takeo*er!+ re*er!e

takeo*er! and other alliane!$

The one"t of takeo*er "iked u" and in the meantime the %euritie! E.hange 1oard of India

2%E1I4 al!o notified the %E1I 2%ub!tantial A/ui!ition of %hare! and Takeo*er4 :egulation!+

566; (hih laid do(n a "roedure to be b& an a/uirer for a/uiring ma#orit& !hare! or

ontrolling intere!t in another om"an&$ The main ob#eti*e i! to en!ure e/ual o""ortunit& to all

!hareholder! and offer "rotetion to them+ in the e*ent of !ub!tantial a/ui!ition of !hare! and

takeo*er!$

(ii) O*e#+ !" #&'e!er

The ob#et! of a takeo*er ma& inter alia be

a$ To effet !a*ing! in o*erhead! and other (orking e."en!e! on the !trength of ombined

re!oure!>

b$ To ahie*e "rodut de*elo"ment through a/uiring firm! (ith om"atible "rodut! and

tehnologial=manufaturing om"etene+ (hih an be !old to the a/uirer?! e.i!ting

marketing area!+ dealer! and end u!er!>$ To di*er!if& through a/uiring om"anie! (ith ne( "rodut line! a! (ell a! ne( market

area!+ a! one of the entr& !trategie! to redue !ome o ri!k! inherent in !te""ing out of the

a/uirer?! hi!torial ore om"etene>

d$ To im"ro*e "roduti*it& and "rofitabilit& b& #oint effort! of tehnial and other "er!onnel

of both om"anie! a! a on!e/uene of unified ontrol>e$ To reate !hareholder *alue and (ealth b& o"timum utili,ation of the re!oure! of both

om"anie!>

f$ To ahie*e$+ eonom& of number! b& ma!! "rodution at eonomial o!t!>g$ To !eure ad*antage of *ertial ombination b& ha*ing under one ommand and under

one roof+ all the !tage! or "roe!!e! in the manufature of the end "rodut+ (hih had

earlier been a*ailable in t(o om"anie! at different loation!+ thereb& !a*ing loading+

unloading+ tran!"ortation o!t! and other e."en!e! and al!o b& affeting !a*ing of time

and energ& unnee!!aril& !"ent on e.i!e formalitie! at different "lae! and !tage!>h$ To !eure !ub!tantial failitie! a! a*ailable to a large om"an& om"ared to !maller

om"anie! for rai!ing additional a"ital+ inrea!ing market "otential+ e."anding

on!umer ba!e+ bu&ing ra( material! at eonomial rate! and for ha*ing o(n ombined

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and im"ro*ed re!earh and de*elo"ment ati*itie! for ontinuou! im"ro*ement of the

"rodut!+ !o a! to en!ure a "ermanent market !hare in the indu!tr&>i$ To inrea!e market !hare>

#$ To ahie*e market de*elo"ment b& a/uiring one or more om"anie! in ne(+

geogra"hial territorie! or !egment!+ in (hih the ati*itie! of a/uirer are ab!ent or donot ha*e a !trong "re!ene$

(iii) Kin,+ !" #&'e!er+

a ) Friendly takeovers

A @friendl& takeo*er@ i! an a/ui!ition (hih i! a""ro*ed b& the management$ 1efore a bidder

make! an offer for another om"an&+ it u!uall& fir!t inform! the om"an&?! board of diretor!$ In

an ideal (orld+ if the board feel! that ae"ting the offer !er*e! the !hareholder! better than

re#eting it+ it reommend! the offer be ae"ted b& the !hareholder!$

In a "ri*ate om"an&+ beau!e the !hareholder! and the board are u!uall& the !ame "eo"le or

lo!el& onneted (ith one another+ "ri*ate a/ui!ition! are u!uall& friendl&$ If the !hareholder!

agree to !ell the om"an&+ then the board i! u!uall& of the !ame mind or !uffiientl& under the

order! of the e/uit& !hareholder! to oo"erate (ith the bidder$ Thi! "oint i! not rele*ant to the

-K one"t of takeo*er!+ (hih al(a&! in*ol*e the a/ui!ition of a "ubli om"an&$

b) Hostile takeovers

A @ho!tile takeo*er@ allo(! a bidder to take o*er a target om"an& (ho!e management i!

un(illing to agree to a merger or takeo*er$ A takeo*er i! on!idered @ho!tile@ if the target

om"an&?! board re#et! the offer+ but the bidder ontinue! to "ur!ue it+ or the bidder make! the

offer diretl& after ha*ing announed it! firm intention to make an offer$ De*elo"ment of the

ho!tile tender i! attributed to Loui! Wolf!on$

A ho!tile takeo*er an be onduted in !e*eral (a&!$ A tender offer an be made (here the

a/uiring om"an& make! a "ubli offer at a fi.ed "rie abo*e the urrent market "rie$ Tender

offer! in the -nited %tate! are regulated b& the William! At$ An a/uiring om"an& an al!o

engage in a "ro.& fight+ (hereb& it trie! to "er!uade enough !hareholder!+ u!uall& a !im"le

ma#orit&+ to re"lae the management (ith a ne( one (hih (ill a""ro*e the takeo*er$ Another

method in*ol*e! /uietl& "urha!ing enough !tok on the o"en market+ kno(n a! a @ree"ing

2 Eur-lex.europa.eu, LexUriServ-PDF

http://en.wikipedia.org/wiki/Tender_offerhttp://en.wikipedia.org/wiki/Market_pricehttp://en.wikipedia.org/wiki/Market_pricehttp://en.wikipedia.org/wiki/Williams_Acthttp://en.wikipedia.org/wiki/Williams_Acthttp://en.wikipedia.org/wiki/Proxy_fighthttp://en.wikipedia.org/wiki/Proxy_fighthttp://en.wikipedia.org/wiki/Majorityhttp://en.wikipedia.org/wiki/Majorityhttp://en.wikipedia.org/wiki/Tender_offerhttp://en.wikipedia.org/wiki/Market_pricehttp://en.wikipedia.org/wiki/Williams_Acthttp://en.wikipedia.org/wiki/Proxy_fighthttp://en.wikipedia.org/wiki/Majorityhttp://en.wikipedia.org/wiki/Majority


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tender offer@+ to effet a hange in management$ In all of the!e (a&!+ management re!i!t! the

a/ui!ition+ but it i! arried out an&(a&$

The main on!e/uene of a bid being on!idered ho!tile i! "ratial rather than legal$ If the board

of the target oo"erate!+ the bidder an ondut e.ten!i*e due diligene into the affair! of thetarget om"an&+ "ro*iding the bidder (ith a om"rehen!i*e anal&!i! of the target om"an&?!

finane!$ In ontra!t+ a ho!tile bidder (ill onl& ha*e more limited+ "ublil& a*ailable information

about the target om"an& a*ailable+ rendering the bidder *ulnerable to hidden ri!k! regarding the

target om"an&?! finane!$ An additional "roblem i! that takeo*er! often re/uire loan! "ro*ided

b& bank! in order to !er*ie the offer+ but bank! are often le!! (illing to bak a ho!tile bidder

beau!e of the relati*e lak of target information (hih i! a*ailable to them$

A (ell kno(n e.am"le of an e.tremel& ho!tile takeo*er (a! Orale?! ho!tile bid to

a/uire 3eo"le%oft$<

c) Reverse takeovers

A @re*er!e takeo*e r @ i! a t&"e of takeo*er (here a "ri*ate om"an& a/uire! a "ubli om"an&$

Thi! i! u!uall& done at the in!tigation of the larger+ "ri*ate om"an&+ the "ur"o!e being for the

"ri*ate om"an& to effeti*el& float it!elf (hile a*oiding !ome of the e."en!e and time in*ol*ed

in a on*entional I3O$ )o(e*er+ in the -K under AIM rule!+ a re*er!e take0o*er i! an

a/ui!ition or a/ui!ition! in a t(el*e0month "eriod (hih for an AIM om"an& (ould'

• e.eed 5BB in an& of the la!! te!t!> or

• re!ult in a fundamental hange in it! bu!ine!!+ board or *oting ontrol> or

• in the a!e of an in*e!ting om"an&+ de"art !ub!tantiall& from the in*e!ting !trateg&

!tated in it! admi!!ion doument or+ (here no admi!!ion doument (a! "rodued on

admi!!ion+ de"art !ub!tantiall& from the in*e!ting !trateg& !tated in it! "re0admi!!ionannounement or+ de"art !ub!tantiall& from the in*e!ting !trateg&$

An indi*idual or organi,ation+ !ometime! kno(n a! or"orate raider + an "urha!e a large

fration of the om"an&?! !tok and+ in doing !o+ get enough *ote! to re"lae the board of

3 Oracle's Hostile Takeover of PeopleSoft (! - Harvar" #usi$ess %evie&

1>

http://en.wikipedia.org/wiki/Due_diligencehttp://en.wikipedia.org/wiki/Bankhttp://en.wikipedia.org/wiki/Reverse_takeoverhttp://en.wikipedia.org/wiki/Float_(finance)http://en.wikipedia.org/wiki/Initial_public_offeringhttp://en.wikipedia.org/wiki/Initial_public_offeringhttp://en.wikipedia.org/wiki/United_Kingdomhttp://en.wikipedia.org/wiki/Alternative_Investment_Markethttp://en.wikipedia.org/wiki/Alternative_Investment_Markethttp://en.wikipedia.org/wiki/Corporate_raiderhttp://en.wikipedia.org/wiki/Corporate_raiderhttp://en.wikipedia.org/wiki/Due_diligencehttp://en.wikipedia.org/wiki/Bankhttp://en.wikipedia.org/wiki/Reverse_takeoverhttp://en.wikipedia.org/wiki/Float_(finance)http://en.wikipedia.org/wiki/Initial_public_offeringhttp://en.wikipedia.org/wiki/United_Kingdomhttp://en.wikipedia.org/wiki/Alternative_Investment_Markethttp://en.wikipedia.org/wiki/Corporate_raider


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diretor! and the CEO$ With a ne( agreeable management team+ the !tok i! a muh more

attrati*e in*e!tment+ (hih (ould likel& re!ult in a "rie ri!e and a "rofit for the or"orate

raider and the other !hareholder!$

(i) Leg& &+%e#+ !" #&'e!er+

The legi!lation!=regulation! that mainl& go*ern takeo*er i! a! under

5$ %E1I 2%A%T4 :egulation! B55

$ Com"anie! At+ 568


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TAKEOVER AND ACUISITION OF MINORITY

INTEREST

(&)T&'e!er !" Uni+#e, &n, C!+e/ He, C!m%&nie+

%etion


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the tran!feror Com"an& b& it! diretor! to ae"t !uh offer$ It !hall be aom"anied b&

!uh information a! "ro*ided under the !aid At$ E*er& offer !hall ontain a !tatement b& or on behalf of the Tran!feree Com"an&+

di!lo!ing the !te"! it ha! taken to en!ure that nee!!ar& a!e (ill be a*ailable$ Thi!

ondition !hall a""l& if the term! of a/ui!ition a! "er? the !heme or the ontrat "ro*ide

for "a&ment of a!h in lieu of the !hare! of the Tran!feror Com"an& (hih are "ro"o!ed

to be a/uired$

E*er& irular ontaining or reommending ae"tane of the offer made the tran!feree

Com"an& !hall be dul& aom"anied b& e09orm No$


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(")N!#ie !" A12i+i#i!n

When+ in "ur!uane of an& !heme or ontrat of thi! kind+ !hare! or !hare! of a la!! in a

om"an&+ ha*e been tran!ferred to another member or it! nominee+ and tho!e !hare! together

(ith other !hare! or an& other !hare! of the !ame la!! are alread& held of the tran!feree

om"an& or it! nominee om"an& or it! !ub!idiar& to the e.tent of nine0tenth! in *alue of the

!hare! or the !hare! of that la!!+ the tran!feree om"an& i! re/uired to gi*e a notie of the fat to

the holder! of the remaining !hare! (ho ha*e not a!!ented to the !heme$ The notie mu!t be

gi*en (ithin one month from the date of the tran!fer+ e.e"t (hen a notie ha! been gi*en in

"ur!uane of the !heme$ An& !uh holder (ithin three month! from the gi*ing of the notie to

him+ re/uire them tran!feree Com"an& to a/uire the !hare! in /ue!tion$ The tran!feree om"an&

then beome! entitled a! (ell a! bound to a/uire tho!e !hare! on the !ame term! on (hih the

!hare! of a""ro*ing !hare holder! (ere tran!ferred or on !uh term! a! the ourt ma&+ on the

a""liation of the !hareholder or tran!feree om"an&+ think fit to order$

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IM3ACT OF TAKEOVER OF SICK COM3ANIES

ON ECONOMY

In a takeo*er+ the management of the a/uirer ma& maintain the legal identit& of both the

om"anie! and o"erate them under the diretion of !e"arate 1oard of Diretor! 2ha*ing ommon

diretor!4 or the management ma& deide that both the om"anie! !hould merge or amalgamate

in a ne( om"an& or one ma& amalgamate or merge (ith the other !o that there i! onl& one

om"an&+ either the ne( om"an& or the merged or the amalgamated om"an& funtioning under

a unified ommand of one 1OD’!$

In either a!e+ the ob#et of !ue!!ful takeo*er of a !ik om"an& !hould be the o*erall

eonomi betterment of the !hareholder!+ the management + the !taff and all other em"lo&ee!+

!u""lier! of ra( material! and other on!umable + "er!onnel engaged in the marketing net(ork+

the ultimate on!umer+ the "ubli at large and the go*ernment$

1& *irtue if better management of the bu!ine!! and affair! of the om"an&+ (ith ati*e and

dediated a!!oiation of /ualified and e."eriened tehnial+ managerial+ finanial and marketing

"er!onnel+ the *alue of !hare! !hould inrea!e+ em"lo&ee! feel a!!ured of timel& "a&ment of their

!alarie! and other due!+ !u""lier! get timel& "a&ment for their !u""lie!+ end "rodut! of the

om"an& are freel& a*ailable$ Go*ernment due! are "aid on time and the om"an& ontribute! o

the !oiet& in (hih it o"erate! and the area! (hereof it !er*e!$ %oiall& on!iou! management

of !uh a unified om"an& i! !u""o!ed to look after the !urrounding and the en*ironment of the

"lae (here it (ork!$ 1e!ide! being benefiial to the onerned om"anie!+ takeo*er! are al!o

benefiial to the eonom& in the follo(ing manner'0

a4 Di!i"lining the a"ital market' Takeo*er! hel" in di!i"lining the market a! ineffiient and

errant om"an&’! get taken o*er due to their book *alue and !hare "rie$ Thi! "roe!! al!o hel"!in di!o*ering the "otential of the !ik om"anie!+ if an&$

b4 Con!olidation of effort! and a"aitie!' In the &e!ter &ear!+ go*ernment authoritie! had i!!ued

lien!e! to unit! (ith a"aitie! muh belo( the minimum eonomi !i,e$ Due to inrea!ed

om"etition in market!+ man& of the!e are either inurring lo!!e! or earning marginal "rofit!$

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Al!o+ in the light of !tringent ontrol !tandard! and emergene of multinational+ !mall unit! ha*e

reali,ed the im"ortane of on!er*ation of re!oure! and redution of oa!t!$ )o(e*er+ due to

lak of "ro"er infra!truture and !uffiient a"ait& the& are unable to im"lement their !heme!

effiientl&$ In !uh irum!tane!+ takeo*er! an be an effeti*e mode of on!olidating !"lintered

a"aitie! to reah the minimum eonomi !i,e$ Thi! (ill be re!ulted into not onl& re*i*al of !ik

unit! but al!o "re*ention of !ikne!!$ Con!olidation of a"aitie! enable! the indu!trie! to gain

om"etiti*e !trength in dome!ti a! (ell a! international market!$

4 Conentrating on ore om"etenie!' Due to re!triti*e lien!ing "oliie! follo(ed b& the

go*ernment+ in the "a!t+ large om"anie! (ere not allo(ed to gro( and di*er!if& ea!il&$

:igorou! "ro*i!ion! of M:T3 "o!ed !eriou! ob!tale!$ The om"anie! (ere re/uired to di*er!if&

into totall& unrelated area!$ )o(e*er+ due to reent de*elo"ment! like liberali,ation andinrea!ing "re!!ure of om"etition+ the& are reali,ing the need to fou! on ore om"etition+ for

(hih merger! and takeo*er! offer green "a!ture!$ Thi! i! beau!e the!e !trategie! enable the

om"anie! to rationali,e their "ortfolio!+ enhane entit& *alue and inrea!e le*eraging a"abilit&$

The unified ommand of the om"an& in a takeo*er tran!ation !hould en!ure reation of more

(ealth through o"timum om"etene+ im"ro*ed "roduti*it& and higher "rofitabilit&$ All

initiati*e! to enhane "roduti*it&+ "erformane and market a"itali,ation !hould be !u""orted$

Thu! the takeo*er !trateg& ha! been onei*ed to im"ro*e general eonomi (ellbeing of all

tho!e (ho are+ diretl& or indiretl&+ onneted (ith the or"orate !etor $It i! ado"ted to inrea!e

the or"orate *alue+ ahie*e better "roduti*it& and "rofitabilit& b& making o"timum u!e of the

a*ailable re!oure! in the form of men+ material! and mahine!$5<

Effiient e/uit& market! are fundamental to the o"eration and indeed e.i!tene of large

om"anie! in modern eonomie!$ Thi! a"ait& to rai!e e/uit& a"ital al!o underlie! om"an&’!

abilit& to borro( loan fund!> it thu! under"in! the a"ital ba!e for *irtuall& the (hole of the

or"orate !etor$ The e.i!tene of effiientl& funtioning e/uit& market! inherentl& "ro*ide!

o""ortunitie! for takeo*er!$ Takeo*er! "ro*ide a mean! b& (hih entre"reneur! (ho belie*e that

the& an u!e the a!!et! of a om"an& more effiientl& than it! e.i!ting management an bid for

13 ,++:@@@.!(!.!'+#+$%!6J2>%)*$!)'6(%!.4*

1


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our!e+ be lo!ed 0 but it i! al(a&! e!!ential to en!ure that a loo"hole doe!+ in fat+ e.i!t$ There

(ill be oa!ion!+ for e.am"le+ (here the ta. ad*antage deri*e! from a #u!tifiable reation to

unintended or unde!irable feature! of the ta. la( or it! inter"retation$ In other a!e!+ om"eting

"rini"le! ma& be in*ol*ed or the ta. !&!tem ma& be being e."eted to !er*e om"eting

ob#eti*e!$ In !ome a!e!+ ?!olution!? (hih &ield the highe!t re*enue ma& be /uite ontrar& to

ba!i eonomi or !oial$

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CONCLUSION

9or the fir!t time+ initiati*e ha! been taken for reditor !a& in the re*i*al and rehabilitation

"roe!!$ The initiati*e i! (elome a! the er!t(hile "roedure for rehabilitating !ik om"anie!

(a! "lagued b& "roedural dela&! and ram"ant mi!u!e of "roedure!$ Creditor!+ a"art from

!heduled bank! and "ubli finanial in!titution!+ *irtuall& had no !a&$ The automati !ta& of

legal "roeeding! again!t the !ik om"an& under the er!t(hile legi!lation (a! often u!ed b&

"romoter! to blok reo*erie! endle!!l&+ muh to the !uffering of the reditor! a! a la!!$ With

the ne( legi!lation+ reditor! ha*e not onl& been em"o(ered but ha*e been gi*en a *oie in the

re*i*al and rehabilitation "roe!!$ Mea!ure! ha*e al!o been taken to en!ure that "roeeding!

reah a ulmination (ithin a time0bound frame$ The go*ernment ha! tried to moderni,e the

legi!lati*e frame(ork for the re*i*al of !ik unit! to "rotet reditor intere!t!$ The ne(

legi!lation introdue! man& "ro*i!ion! aimed at !euring the "o!ition of reditor! in a!e of

im"ending !ikne!! of a om"an&$

9ir!t+ a ne( tribunal alled the National Com"an& La( Tribunal i! "ro"o!ed to be !et u" to

unlog the legal !&!tem and fa!t0trak or"orate rehabilitation$ The "ro*i!ion! allo( !eured

reditor! re"re!enting 8B or more of the out!tanding debt! of a om"an& to file an a""liation

(ith the National Com"an& La( Tribunal for delaring a om"an& !ik$ The a""liation an be

filed if a om"an& fail! to "a& !uh reditor! (ithin


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With di!retionar& and time0bound !ta&!+ onl& genuine a!e! of rehabilitation (ould get the

benefit$ Dilator& tati! b& "romoter! to a*oid reo*erie! an be effeti*el& ountered b&

reditor! under the ne( legal frame(ork$ The ne( At al!o "re!ribe! !"eifi timeline! in the

re*i*al and rehabilitation "roe!! that (ill a*oid endle!! litigation$

At the !ame time takeo*er ha! "la&ed a ma#or role b& im"ating the eonom& a! Takeo*er!

"ro*ide a mean! b& (hih entre"reneur! (ho belie*e that the& an u!e the a!!et! of a om"an&

more effiientl& than it! e.i!ting management an bid for the om"an& and "ut their belief! to

the te!t$ The e."etation that the& an generate higher return! (ill mean that the a!!et! (ill be

(orth more to them and the& (ill be "re"ared to offer a higher "rie$ Takeo*er! an thu!

ontribute to "romoting the mo!t effiient u!e of e.i!ting or"orate a!!et!$

Al!o+ the takeo*er !trateg& ha! been onei*ed to im"ro*e general eonomi (ellbeing of all

tho!e (ho are+ diretl& or indiretl&+ onneted (ith the or"orate !etor $It i! ado"ted to inrea!e

the or"orate *alue+ ahie*e better "roduti*it& and "rofitabilit& b& making o"timum u!e of the

a*ailable re!oure! in the form of men+ material! and mahine!$

O*erall (hat (e an !ee i! that b& a/uiring the a!!et! of the !ik om"an& or b& taking o*er the

!ik om"an& + benefit! the !hareholder! of the both om"anie! a! (ell a! the em"lo&ee! of both

the om"anie!$ It enhane! the "rodution of the om"an& and a! re!ult! further ad! to the

eonom& of the ountr&$

In thi! (a& the h&"othe!i! made in thi! "ro#et ha! been an!(ered that+ F&e!+ takeo*er! of the

!ik om"anie! ha*e "o!iti*e im"at on the eonom&J$

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BIBLIO4RA3HY 1. ?)6 A,!# 2>>5" R$&>5" F)%$!&'I'+!+A6!$4 F!''($ M%(, . 1=-3>.

$ ?)/%' S>7". C)%)%+$?)0$%''($ !' I'4!: H C6

distressed companies

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