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CORPORATE SICKNESS

Meaning
A sick company is an industrial company (being a
company registered for not less than seven years)
which has at the end of any financial year
accumulated losses equal to or exceeding its entire
net worth and has also suffered from cash losses in
such financial year immediately preceding such
financial year The sick industrial companies
(special provisions) Act, (SICA) 1985

Signals and Symptoms of Sickness


Decline in capacity utilization
Shortage of liquid funds to meet short term obligations
Inventories in excessive quantities
Non submission of data to banks and other financial units and frequent
request for bank loan
Irregularities in maintaining bank accounts
Frequent breakdowns in plants and equipments
Decline in quality of products manufactured or service rendered
Delay or default in the payment of statutory dues
High attrition rate

CAUSES AND CONSEQUENCES OF INDUSTRIAL


SICKNESS
EXTERNAL OR EXOGENEOUS CAUSES
Changes in the industrial policies of the Government
Inadequate and untimely availability of necessary inputs
Lack of demand for the product
Recession in the economy
Frequent industrial strikes and labour unrest
Shortage of financial resources especially working cap
Natural calamities like floods, drought etc

Internal Causes

Lack of good management


Poor implementation
Marketing problems
Non-availability of raw materials
Shortage of working capital
Labour trouble
Technical operational problems etc

Consequences
Huge financial losses to the banks
Loss to employment opportunities
Emergence of industrial unrest
Adverse effect on prospective investors and entrepreneurs
Wastage of scarce resources
Loss of revenue to the government

CORRECTIVE MEASURES
Identification of sickness at the early stage (incipient stage) reduces
deterioration
Merger of large number of sick units will be a welcome proposition
There should be a consensus among financial institutions management and
laborer on continuity and rehabilitation of suck units
There should be a separate board for the reconstruction of suck units
Rehabilitation programs should be carried out on permanent basis.
Decision to rehabilitate a sick unit be finalized quickly, and in full swing
other it may jeopardizes all efforts
Banks and financial institutions have to periodically review the accounts of
small scale units.

THANK YOU