For ease of doing biz, focus set on ‘process reforms’, easing exit norms

Liquidation can be involuntary as in the case of insolvency or bankruptcy; or voluntary, which could be due to personal reasons and subsidiaries being merged. A company may decide to voluntarily close its operation even when it’s viable. “There is a case for simplifying the problem in the Voluntary Liquidation process, to improve ease of exit for business. Apart from simplifying the issues in the various steps in the processes, there is a need for the creation of a single window for the entire process. A portal that combines all the steps of the liquidation process altogether, starting from application by companies to processing by all departments will prove to be very useful,” it said. As of September 2021, 1042 cases have been filed under voluntary liquidation, out of which, final reports have been received for 483 cases, and the final order of dissolution has been passed in 257 cases. Of the ongoing cases, nearly 32 per cent of the cases are pending over 2 years and 19 per cent for 1-2 years.

Cross-border insolvency

Cross border insolvency involves circumstances in which an insolvent debtor has assets and/or creditors in more than one country. The Survey said the current provisions under IBC are ad-hoc in nature and are susceptible to delay. Entering into mutual (reciprocal) agreements requires individual long-drawn-out negotiations with each country. This leads to uncertainty of outcomes of claims for creditors, debtors and other stakeholders, the Survey mentioned. Therefore, there is a need for a standardised framework for cross-border insolvency, it said. Insolvency and Bankruptcy Code, 2016 (IBC) provides for the domestic laws for the handling of an insolvent enterprise. At present, IBC has no standard instrument to restructure the firms involving cross border jurisdictions. Citing the report of the Insolvency Law Committee (October 2018), it said the the United Nations Commission on International Trade Law (UNCITRAL) could be adopted with certain modifications to suit the Indian context.

Delays for granting patents

Highlighting India’s low expenditure on Research and Development (R&D) activities as one of the key reasons for relatively low patents in India vis a vis the US, China, the Survey said the procedural delays and complexity of the process also result in low patents in India. “The average pendency for final decision in acquiring patents in India is 42 months as of 2020. This is much higher than 20.8, 20, 15.8 and 15 months respectively for the USA, China, Korea and Japan,” it said. The average pendency for final decision in acquiring patents has reduced in India from 64 months in 2017 to 52 months in 2019 and further to 42 months in 2020.

Most of India’s startups are in the IT/ knowledge-based sector. The time taken for the first step for a patent, i.e. publishing the application by the controller, is currently 18 months in India, compared to 15.4, 14.4, 11.1, 10.2 months, respectively, in the US, China, Korea and Japan. To reduce the time taken in the application process, prescribed limits for the first step may be reduced to 14-15 months.