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Is the company 'sick'

Dipjyoti Majumdar (CA in service & CS. dipmaj@ rediffmail.com ) (3468 Points)

18 October 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,

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3 Replies

Preet Kanwar Singh (Company Secretary) (161 Points)
Replied 18 October 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.