The document discusses corporate finance rehabilitation for sick industrial units. It defines a sick industrial company as one with accumulated losses exceeding its net worth for at least 5 years. The Board of Industrial and Financial Reconstruction (BIFR) was established to detect, determine measures for, and enforce the rehabilitation of sick companies. When a company is deemed sick, BIFR directs an operating agency to prepare a revival package that can include additional financing, loan repayment postponement, management changes, asset sales or leases to restore the company's health. Revival is needed to utilize existing assets and infrastructure and prevent impacts on dependent ancillary units, banks and financial institutions. Causes of sickness can be internal factors like poor project implementation or marketing,

1. CORPORATE FINANCE

2. REHABILITATION FOR SICK UNITS PRESENTED BY ANGSHUMAN CHOUDHURY

3. INTRODUCTION Sick industries have far-reaching consequences on the economy of the nation. The following are the bad effects of Industrial Sickness-- 1.There is under utilization of capital assets. 2.The entrepreneurship level declines.. Increase in industrial sickness discourages entrepreneurship. 3.The investor confidence reaches a lower ebb. Thus, capital is not put to productive use. 4.Industrial sickness results in large scale unemployment and industrial unrest. 5.Profitability of banks and financial institutions gets affected since they don’t get back their funds invested in projects that have gone sick..

4. DEFINITION OF SICKNESS The sick industrial companies (Special provisions) Act, 1985, as amended in 1993 defines – Sick Industrial Company as an industrial company (being a company registered for not less than five years) which has at the end of any financial year accumulated losses equal to or exceeding its entire net worth.

5. BOARD OF INDUSTRIAL AND FINANCIAL RECONSTRUCTION (BIFR) (BIFR) was established by the Central Government, under section 3 of the Sick Industrial Companies (Special provisions) Act, 1985 and it became fully operational in May, 1987. R ole of BIFR as envisaged in the SICA (Sick Industrial Companies Act) is: (a) Securing the timely detection of sick and potentially sick companies. (b) Speedy determination by a group of experts of the various measures to be taken in respect of the sick company. (c) Expeditious enforcement of such measures.

6. Reporting to the BIFR To report the sickness to the BIFR within 60 days of finalisation of audited accounts, for the financial year at the end of which the company has become sick. The BIFR prescribes a different format for the report to be submitted by any interested parties regarding the sickness.For eg’s – Banks , other financial institutions. When a company has been financed by a consortium of banks,it is the Lead Bank that should report to BIFR about the sickness under advice to other participating banks in the consortium .

7. Enquiry by the BIFR When a case is referred to the BIFR, it is verified by the Registrar of the BIFR as to whether the company is SICK. BIFR accepts the case and notifies a date for hearing the case. Co-ordination of connected agencies is achieved by BIFR. Invites the informant Sick Company to come to negotiation with the concerned financial institutions. After the Survey and hearing, the court summons the rehab to an operating agency.

8. Revival Package Once a company has been found sick, the BIFR may grant time to the sick company to enable it to make its networth positive and bring the company out of sickness, without any external financial assistance. The BIFR will direct the operating agency to prepare a suitable revival package for the restoration of the health of the company. Revival Package includes- additional financial assistance, postponement of recovery of loan already lent by banks, change in management, amalgamation, sale of redundant assets, lease of assets or any other suitable measure.

9. Need for revival/rehabilitation programme A sick company has already swallowed huge scarce resources. In order to utilize the assets and infrastructure already created for the project, the project is to be revived from sickness. Revival of a sick unit may be necessitated, because – 1. The project may be in a sector that is vital to the economy . 2. Many ancillary units may be dependent on the unit that has gone sick. Unless the sick unit is revived, it will have a chain effect of all such dependent ancillary units becoming sick. 3. Banks and financial institutions would have locked up their money in sick ventures.

10. Causes of Sickness Internal Causes- Project formulation. Project implementation. Production. Marketing. Finance. General and personnel administration

11. External Causes Government’s plans and actions. Failure of monsoon which affects agriculture and allied industries. Emergence of strong competitors etc

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