“After 37 years, with strong commitment to hard work, having directly created 30,000 jobs in our companies and their subsidiaries, as well as another 20,000 jobs in technology company, where I have been a large shareholder since its founding, I have failed to create the right profitable business model despite my best efforts”, read V.G. Siddhartha’s suicide note who was the founder of the famous Café Coffee Day (CCD) chains.
The Indian Coffee Baron, in his departure note to his professional family, admitted to not being able to create an appropriate profitable business model and admitted being under pressure from lenders.
However, V.G. Siddhartha is not the only tycoon who lost self-confidence/ self-esteem, which led him to take the most drastic step to end his life. In fact, his death further puts limelight on the extreme stress entrepreneurs are consistently in, which forces them to succumb to mental stress and depression.
Now, according to the departure note of the CCD Baron, he was in extreme stress and mental trauma as he owed huge amount of monies to lenders which proves that he was on the verge of insolvency.
Insolvency can be described as a situation when a company or an individual can no longer pay what they owe to their lenders/ investors/ banks etc. on time; or when the value of their assets owned are lower than the money they owe. The law (mainly the Insolvency and Bankruptcy Code, 2016) provides legal remedy to companies/ individuals after they turn insolvent.
So what can an entrepreneur do when he is on the verge of succumbing to stress and depression due to insolvency? The first step is to get in touch with an expert lawyer.
Under the Insolvency and Bankruptcy Code, 2016 (Code), in case of an entrepreneur (Corporate Debtor) is in debt, they may submit an application under Section- 10 of the Code for initiation of insolvency proceedings. The entrepreneur must supply all information regarding the books of account and the RP (person who determines the liquidation value of the Corporate Debtor by way of reaching at an estimated probable value of the assets on the insolvency initiation date) to be appointed. In addition, a special resolution has to be passed by the shareholders of the Corporate Debtor or a resolution by at least 3/4th of the total number of partners of the company must be passed, agreeing to the filing of the insolvency resolution application.
Although there may be some scepticism regarding the abuse of Section- 10, it is a crucial tool available to the corporate debtors when looking to resolve their insolvency, especially in cases where creditors hold back or are dragging their feet on selecting an outside Code resolution plan. Anyhow, the success of this legal provision is dependent on how jurisprudence around Sections 65 and 66 of the Code evolves. While Section- 65 provides a brake to file (keeping in mind the risk of National Company Law Tribunal (NCLT) deciding malicious or fraudulent intentions by the debtor), Section- 66 provides a motivation to the Directors to file (to evade personal liability for unfair trading).
Under Section- 55 of the Code, the yardstick for requesting Fast Track Resolution depends on the debtors income, assets and volume of debt. This covers the procedure from inception of insolvency till the acceptance of such resolution by the National Company Law Tribunal (NCLT), which concludes the procedure. The entire procedure is concluded within 90 days. Although, the National Company Law Tribunal may, if contented, increase the period of 90 days by another 45 days.
Under the Companies Act, 2013, the Corporate Debtor (entrepreneur) with other partners can formally resolve to voluntarily wind up the business of the company and thus, dissolve it under Section- 304. The aim of voluntarily winding up a company is to enable the creditors and debtors to settle their issues among themselves without having to go to Court. However, voluntary winding up is only available to solvent companies i.e. companies having more assets than liabilities.
First, it is not entirely fair to tax such business houses but become their support system in tough times, primarily because businesses like CCD are private and therefore, they cannot be given direct bailout packages or financial help like in the case of Air India etc. However, these businesses have shareholders who are the common people or in other words, the electorate and when such businesses dissolve, the shareholders are impacted terribly. Since shareholders are the investors, they need to be protected for building the nation’s economy.
Now the question is how can the Government help when such drastic steps are taken . The law, local investigating agencies as well as the government must identify, whether the entrepreneur is trying to find a solution or whether he is trying to evade paying back the money. Moreover, the Government agencies should have cells, which can work out a plan to save the business house through mergers etc. though all this requires a decent amount of time.
Therefore, the Government can try to make amends with the present law to go all out to help already established businesses. This will act as a booster to other business houses to enhance their performance because they will have the backing of the Government. The Government, through fair and impartial means, must identify who has cheated by design, or who has been a victim of market trends.
Finally, the businesses whether new or old must be nurtured so that these small saplings can turn into mighty oak trees which will only help boost the economy of the nation. Moreover, besides multiple reforms like GST etc. which are trying to create more transparency in businesses. It is only a matter of a few decades (hopefully) that the business system will evolve into a healthy productive part of nation-building, where global achievers like V.G. Siddhartha are healthy and high on self-esteem and working on building the nationCopyright 2022 – Helpline Law
The rate at which suicide has been increasing in the country has been staggering off late, with
The rights to physical integrity and self-determination are fundamental rights, which are available
Phone-tapping is the monitoring of internet-based and telephonic conversations b
The Supreme Court judgment to decriminalize Section 377 of Indian Penal Code (IPC) on 6th September
With the youth becoming more conscious of their rights through information ex
What is medical negligence?In simple words, medical negligence emerges from an action or
In this article, we dissect the following regulations introduced by the Lakshadweep Administrati
Every time an offender stealthily leaves India to take refuge in another country, the Govern