eKTP 28

Corporate Rescue Mechanisms under Companies Act 2016
Change in Company Act, Part 4 of 4


Corporate Rescue Mechanisms

The new Act introduced two new corporate rescue mechanisms to help financially distressed companies. The purpose is to allow the distressed companies to restructure their debts, to remain as a going concern and to avoid winding up.

a. Judicial Management

The shareholders, directors or creditors of the distressed company may apply to Court to place the management of the company in the hands of an independent and qualified Judicial Manager. The company will enjoy a very wide moratorium which gives it protection from legal proceedings. This is to give the company and the judicial manager breathing room and to maintain the company as a going concern.

b. Corporate Voluntary Mechanism

This allows a private company to put up a proposal to its creditors for a ‘voluntary
arrangement’ without the need for the compromise or arrangement to be approved by the Court.

This is meant to be a quick and cheaper process, with minimal Court involvement.