For devout individuals, getting rid of sins is relatively easy. If you are a Hindu, you take a dip in the holy river, Ganga. If you are a Catholic, you confess to your priest. But companies had no such easy path to absolution. Till we created the Insolvency and Bankruptcy Code (IBC).
For a company, the biggest sin is a failure to service its loans. And the wages of sin are, indeed, death or used to be, an albeit a slow one. With the IBC and the resolution process undertaken by the National Company Law Tribunal (NCLT), companies that have sinned mortally can now have a chaste afterlife. Which is not a bad thing at all. But, in this afterlife, too, it can acquire the same promoters/managers who ran it into the ground in the first place. …
Read the full article at: http://blogs.economictimes.indiatimes.com/cursor/moral-hazard-of-a-high-order-runs-through-the-current-design-of-the-insolvency-process/