Liquidation as “going concern” gains ground

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The liquidation of the business as a “going concern”, instead of liquidating it and selling the assets bit by bit, is gaining ground, as it allows to obtain a higher value for the creditors while safeguarding the means of subsistence of the employees.

The Ahmedabad branch of the National Company Law Tribunal (NCLT) last week passed an order allowing the liquidation of an insolvent company, PSL Ltd, retaining its operational status and its sale as a going concern.

PSL, which has four main factories, had filed for resolution proceedings under the Insolvency and Bankruptcy Code. However, the company which had been under the direction of the Council for Industrial and Financial Reconstruction for the past seven years did not receive an appropriate motion for a resolution and the NCLT ordered its liquidation.

Later, at an auction, Lucky Holdings made a bid to acquire it as a going concern and emerged the successful bidder.

In the meantime, the Directorate of Enforcement had ordered the liquidator not to proceed with the sale. However, the Delhi High Court authorized the sale in March this year.

“This approval by the NCLT will go a long way in resolving some of the practical problems encountered in implementing the sale of the debtor company as a business in liquidation,” said Nitin Jain, the liquidator of the company which works as a partner. at AAA Insolvency Professional.

“With the survival of the business and its acquisition by the incoming investor, this will lead to preservation of value versus liquidation in the piecemeal selling process,” he said.

Last month, the bankruptcy appeals court issued a similar order in the Mohan Gems & Jewels case.

The order of the NCLT last Wednesday said that some sections of the IBC provided for the sale of debtor companies or their business as a going concern in accordance with the general objective of the law – the revival and continuation of the business as a going concern.

“We have seen that potential buyers are now more confident in the process of selling a debtor business as a going concern during the liquidation process,” said Anil Goel, founder of AAA Insolvency Professionals.


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