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1. CORPORATE SICKNESS
SNEHA PRIYA
MBA/15001/22

2. CORPORATE SICKNESS
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3. “Industrial sickness” refers to
industrial weakness when the
business fails to profit reasonably. It
is the persistent debt-to-equity ratio
imbalance and the inaccurate
representation of the financial
situation of the industrial unit.
Industrial Sickness is a stage where a
company cannot consistently
generate a surplus and must rely on
outside financing to survive in the
market. A unit cannot support itself
while it is ill through normal
functions.
Presentation Title

4. HISTORY OF CORPORATE SICKNESS
The government defined industrial sickness for the first time in the Sick Industrial Companies
(Special Provisions) Act, 1985.According to this Act, a medium or large (i.e. non-SSI) company was
defined as sick if:
(1) It was registered for at least 7 years (later reduced to 5 years)
(2) It incurred cash losses in the current year and the preceding year.
(3) Its entire net worth (i.e. paid-up capital and reserves) was eroded. A company is regarded, as
weak or incipiently sick on the erosion of 50% of its peak net worth during any of the
preceding five financial years.
Industrial sickness has been redefined in the Companies (Second Amendment) Act, 2002.

5. CORPORATE SICKNESS IN INDIA
In its attempt to give an appropriate definition to industrial sickness, the Government laid out a
Sick Industrial Companies Act (SICA), also known as Special Provisions Act in 1985. The SICA Act
was introduced by the government in an effort to lay out certain special provisions that could
enable the identification of sick units on time.
The Board for Industrial and Financial Reconstruction (BIFR) was formed under SICA to
determine the extent of the industrial sickness of such units and further decide if they need to be
revived or completely shut off. The Government, in its act, laid out certain guidelines based on
which a large-sized or a medium-sized company or unit could be defined as sick.

6. SYMPTOMS OF CORPORATE SICKNESS
Industries can keep a check on their financial well-being before they get gravely sick. They can
monitor themselves based on the symptoms listed below:
Imbalance in the unit’s financial position.
• Inappropriate utilization of resources.
• Imperfect goods production.
• Misuse of credit facilities.
• Early repayment of instalments and interests.
• Unbalanced cash and credit balances.
• Several outstanding bills.
• Frequent changes in the management across units

7. CAUSES OF CORPORATE SICKNESS
Causes of Industrial Sickness Talking about the small-scale industry (SSI), there can be various
reasons for a company to suffer from industrial sickness. Therefore, the causes of industrial
sickness can be divided into two categories – Internal Causes and External Causes. Let us look
into the various causes of industrial sickness below.
Internal Causes for Industrial Sickness: The internal causes of industrial sickness refer to such
factors that arise because of certain internal disorders and are within the control of the
management, such as-Financial crunch. Inappropriate production policies, Inefficient
maintenance of machinery, No control over the quality, Lack of R&D, Incorrect market research
methods and poor sales promotions, Improper corporate management.
External Causes for Industrial Sickness: Apart from the internal causes that we discussed above,
there are many external factors also that affect the level of industrial sickness. These are the
factors that are not directly under the control of the management such as-Unavailability of
skilled labor. Marketing constraints such as marketing recession or imprudent tax policies.
Shortage of raw materials, power, and fuel. Restrictions on import-export and high prices.

8. REMEDIES OF CORPORATE SICKNESS
To overcome the problem of sickness, industries can adopt some recovery policies. These policies
are remedies that can cure the gravely sick units and those on the verge of getting sick. The type of
sickness may vary among units and industries. So, they need tailor-made solutions for each one of
them. In taking remedial actions, the Government, Financial Institutions and Banks play a vital
role. The Government can formulate policies and take the initiative to support the sick units. They
must focus primarily on SMEs to protect them from getting sick. Financial Institutions can prevent
illness by careful selection of projects. They can conduct deep research before promoting the
projects. Besides, timely and strict research post-implementation is also a must.

9. KINDS OF CORPORATE SICKNESS
The Corporate sickness hits industries in various stages. In addition, it is triggered by multiple
causes at different stages. Consequently, three kinds of illness can be seen based on the stages and
causes as follows:
Born Sickness: It is the kind of sickness which hits the industrial unit at its inception stage. The
causes for sickness are given below:
oLack of experience on the promoter’s end
oImproper financial management
oLocation and technical problems
oInsufficient result
oDelay in payments
Achieved Sickness: This type of sickness happens due to the mismanagement of the unit. It is
triggered by the internal factors affecting industries as follows:

10. KINDS OF CORPORATE SICKNESS
oInefficient functional management
oLack of skillset in the level of management
oEffects of government policies
oInaccurate appropriation of funds
Sickness Thrust on them: This kind of sickness is caused by external factors affecting the industrial
unit. As a matter of fact, these factors are uncontrollable by the industries.
oGovernment Policies
oCredit Squeeze
oUnavailability of Raw Material
oLack of material and transportation facilities
oShortage of Power, etc

11. CONCLUSION
Industrial sickness has brought unfortunate consequences leading to huge wastage of resources,
unemployment, labor unrest and loss of revenue to the government.
Sickness should be detected at the initial stages and it requires legal and economic measures on the
part of government and the related agencies.
Industrial sickness is a significant problem in many market economies, more so even in the case if
Indian economy. The sickness in small industries is very much looming and large as compared to
medium and big industries.
The cause for corporate sickness is lack of demand and shortage of working capital were responsible
for the magnitude of sickness in both registered MSME and un registered MSME sector.
Further, analysis also reveals that thetendency of sickness is at declining end over the years,
however, the amount involved or locked up in the units is on the increasing end.
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