It’s probably for the first time that I read a newspaper piece on how to close your business correctly and ‘gracefully’ as the headline proclaimed. The case being studied was that of one of Mumbai’s oldest mobile service providers which has one million customers.
The opinions of business owners, professors and industry executives converged on the following: 1) Being fair to all stakeholders- company management, promoters and employees. 2) Being fair to vendors and customers. 3) Transparent and honest communication with every one of the above 4) Placement of assets- both physical and human- in other companies.
So while it worries about its own reputation, does a company have to think of all this too? Why? That’s because, as one commentator says, lenders do not forget. How you close shop is indicative of how you manage and can adversely affect the fortunes of the other companies of the promoter or promoting group.
While all the above speak of the business side of the story, there is also the business of honour, the ‘right thing to do’. They suggest: Distribute the remaining funds among the stakeholders so no one feels cheated or short-changed. For the same reason, they say, give good reference letters to employees, absolving them of the responsibility for the shutdown.
The ‘right thing to do’ mostly means that stuff that won’t bring you down legally but you will think about it when you introspect.
I can remember over a decade back the debacle of ABCL, the Amitabh Bachchan-promoted entertainment company that became a basket case, taking down with it many people’s money and reputation. He was clearly safe legally and the company could have easily filed under BIFR and saved itself a lot of bother. But Mr. Bachchan felt that he was morally obliged to returning people’s money because he was the big reason they had invested. He went back to work- starting with KBC- and returned every paisa. So the story goes.
On the other side, around the same time, were innumerable cases where companies that weren’t doing well wanting to shut down. Promoters were forcing Voluntary Retirement Schemes down employees’ throats, making a joke of the purpose of the schemes. There were companies where employees agitated and cases may still be stuck in courts all over. Labour unions were fighting battles for them but I am not sure how many got resolved.
How to behave with grace when the chips are down always makes for an inspiring tale. And most often, it is led by character, not law.
The opinions of business owners, professors and industry executives converged on the following: 1) Being fair to all stakeholders- company management, promoters and employees. 2) Being fair to vendors and customers. 3) Transparent and honest communication with every one of the above 4) Placement of assets- both physical and human- in other companies.
So while it worries about its own reputation, does a company have to think of all this too? Why? That’s because, as one commentator says, lenders do not forget. How you close shop is indicative of how you manage and can adversely affect the fortunes of the other companies of the promoter or promoting group.
While all the above speak of the business side of the story, there is also the business of honour, the ‘right thing to do’. They suggest: Distribute the remaining funds among the stakeholders so no one feels cheated or short-changed. For the same reason, they say, give good reference letters to employees, absolving them of the responsibility for the shutdown.
The ‘right thing to do’ mostly means that stuff that won’t bring you down legally but you will think about it when you introspect.
I can remember over a decade back the debacle of ABCL, the Amitabh Bachchan-promoted entertainment company that became a basket case, taking down with it many people’s money and reputation. He was clearly safe legally and the company could have easily filed under BIFR and saved itself a lot of bother. But Mr. Bachchan felt that he was morally obliged to returning people’s money because he was the big reason they had invested. He went back to work- starting with KBC- and returned every paisa. So the story goes.
On the other side, around the same time, were innumerable cases where companies that weren’t doing well wanting to shut down. Promoters were forcing Voluntary Retirement Schemes down employees’ throats, making a joke of the purpose of the schemes. There were companies where employees agitated and cases may still be stuck in courts all over. Labour unions were fighting battles for them but I am not sure how many got resolved.
How to behave with grace when the chips are down always makes for an inspiring tale. And most often, it is led by character, not law.
