India’s
corporate landscape includes a significant number of Multinational Companies
(MNCs) operating through wholly owned subsidiaries, joint ventures, or
branch/liaison offices. These entities may at some stage consider closure or
exit from the Indian market due to strategic realignment, financial distress,
regulatory challenges, or other commercial considerations.
Exit
strategies for MNCs in India involve a range of legal, financial, and
operational considerations to ensure a smooth and compliant withdrawal from the
market. The primary objective is to present a comprehensive and
comparative analysis of the legal framework governing the closure
of Multinational Companies (MNCs) operating in India, based on
their solvency status. In the dynamic and evolving landscape of
global business, MNCs often reassess their market presence and may choose to
exit jurisdictions for strategic, financial, or operational reasons. In such
instances, understanding the legal options and procedural requirements for
closure becomes critical.
There
are two principal legislative frameworks governing corporate exit in
India- Insolvency and Bankruptcy Code, 2016 (IBC), and the Companies
Act, 2013. Their primary focus is to delineate the exit mechanisms
available to multinational corporations, both in situations of solvency and
insolvency, through a critical analysis of the key legal processes prescribed
under these statutes.
Through
a detailed examination of these legal pathways, it is aimed to provide clarity
on the conditions, procedural timelines, regulatory authorities involved (such
as the National Company Law Tribunal (NCLT), Registrar of Companies (ROC), and
Insolvency and Bankruptcy Board of India (IBBI)), and compliance requirements
relevant to each mode of closure.
By
bridging the legal and procedural understanding of company closure mechanisms,
this study aims to contribute to better strategic decision-making for
MNCs contemplating an exit from the Indian market, while also offering policy
insights that may inform future legislative reforms.
Classification
of Companies Based on Solvency
Legal
procedures vary based on the financial position of the company:
a)
Solvent Companies
Entities
that can pay off their debts as they fall due. Closure mechanisms include:
● Strike-off
under Section 248 of the Companies Act, 2013
● Voluntary
Liquidation under Section 59 of the IBC, 2016
● Winding
Up of Companies under Section 271 of the Companies Act
b)
Insolvent Companies
Entities
unable to pay debts. Closure is initiated through:
● Corporate
Insolvency Resolution Process (CIRP), followed by liquidation under IBC
followed by liquidation
● Winding
Up of Companies- Section 271 of the Companies Act
