Is the company 'sick'

415 views 3 replies

Dipjyoti Majumdar

CA in service & CS. dipmaj@

3487 Points Joined June 2011

Friends/seniors

If paid up capital of a company =100,000 ; reserves & surplus = 0 ; and accumulated loss = 60,000 does the company becomes sick under SICA .

The term ‘Sick Industrial Company’ has been defined under the Sick Industrial Companies (Special provisions) Act, 1985 as follows:

“An Industrial company which has at the end of any financial year accumulated losses equal to or exceeding its entire net worth.”

Regards,

Replies (3)

Preet Kanwar Singh

Company Secretary

161 Points Joined January 2011

The net worth is calculated as sum total of paid up capital and free reserves of a company less the provisions and expenses, as may be prescribed. However, an industrial unit is also regarded as potentially sick or weak unit: if at the end of any financial year, it has accumulated losses equal to or exceeding 50 per cent of its average net worth in the immediately preceding four financial years and has failed to repay debts to its creditor(s) in three consecutive quarters on demand made in writing for such repayment.