Bankruptcy- Turmoil yet a Turnaround.
The idea behind the post is not to scare you with the godforsaken word which has given panic and or heart attacks to business tycoons but to leap you up with hope. Many a times, we read " ABC Ltd.- Bankrupt!!" as headlines and pass our judgments over a tea break but never actually break down the word which is more than a dreadful sword hanging over your dear business.
When an individual or an entity is unable to pay debts or honor it's financial obligations to its creditors, it files for Bankruptcy. In such a scenario, the outstanding debts and assets are measured and classified. It is perceived as an extremely negative word but in reality it actually offers a chance to an individual or a company to start afresh without saying goodbye to their precious assets.
The bankruptcy cases are dealt in different ways in various countries. In the USA, they are tried under three chapters and hence the assets and debts need to be categorized and checked as to which chapter fits your case. In India, the Insolvency and Bankruptcy Code, 2016 was passed by the National Tribunal Company Law which deals with individuals, companies and partnership firms. Such cases if tried in India is a huge blow to your credit rating and it might be near impossible to start afresh. Our legal system failed to collect all facets of the information leaving loopholes to win their entity by inviting promoters of the very same company who would buy back the company at a cheaper settlement price by just raising higher bids. However, a fresh rule by the government of India has tightened the screws by banning any defaulting promoters from bidding, which means they will lose their companies to a new owner. Such a proposal will tap the dishonest promoters who viewed the Bankruptcy code as a means to settle their debts cheap and regain control.
The proposal puts out a crisp message that the clique business owners who have been with the company through many financial and cultural refurbishments cannot have a friendly third-party to bid on behalf of them. The new rule however necessary and standardized is perceived as unfair for the honest corporates who are genuinely looking for a second chance.
“Leaders win through logistics. Vision, sure. Strategy, yes. But when you go to war, you need to have both toilet paper and bullets at the right place at the right time. In other words, you must win through superior logistics.” – Tom Peters
The term resonated in the logistics industry last year when Hanjin, a South Korean shipping line filed for Bankruptcy. The world's 9th largest shipping line left a wide ripple in the ocean after the announcement. Many ports had refused to handle it's cargo and even Indian consignments were on the sea nowhere close to their delivery terminal. The timing could not be worse for the US importers for moving their holiday freight which was stranded on the Hanjin ships.
Like the economic meltdown of 2005 where the downfall of the US economy impacted at all levels, the declaration of Hanjin affected not just it's clients but impacted the supply chain altogether.
A. Supply Chain Interruption means freezing of shipments holding crores of freight which not only impacts the wholesale retailers but also partners in the chain. The Holiday or festive consignments which are ordered in advance are the most critical in such a scenario.
B. Holding up of the cargo causes reordering of the material which incurs additional and higher operational costs squeezing the profit margins of the logistic organizations.
C. It goes without saying that freezing of the chain refers to the cargo unable to reach the docks thereby affecting the macroeconomic equations stunting the GDP.
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