Insolvency and Bankruptcy Code, 2016 – Part 3
Introduction : In part 3 we will discuss who can be part of committee of creditor, what are the quorum requirement for meeting of committee of creditors, how company can apply for Fast Track insolvency resolution process or how can company apply for Voluntary Liquidation under insolvency and bankruptcy code, 2016. What will be other practical issues that company is required to face and what will be sequence of payment in case of liquidation.
Committee of Creditors:
The committee is constituted by Interim resolution professional. The composition of committee of creditor will be as follows
What if it is the case of Joint-financial creditor?
In case of joint financial creditor (i.e. if debt is owed by two or more financial creditor) than in that case each such financial creditor will be part of committee of creditors. Further their voting share will be determined on the basis of the financial debts owed by them to corporate debtor.
Meeting of Committee of Creditors:
Whenever any resolution is required to be passed at meeting of committee of creditors will be required to be approved by minimum 51% of the voting share of financial creditor. This we be determined based on value. e.g. If company has total debt of Rs. 1,00,00,000/- then resolution is required to be approved by 51% of creditor i.e. creditor who are holding value of more than Rs. 50,00,000/-.
However, it shall be noted as discussed in previous article that if their replacement of resolution professional then resolution is required to be approved by 66% of the voting share of financial creditor.
Whether notice is required to be severed for meeting of Committee of Creditors? If yes, then to whom it shall be given?
Yes, it is mandatory to given notice of each meeting to committee of creditors. Along with all the members of committee of creditor (in their absence to their authorized representative) notice is require to be served to suspended Board of Directors or the partners of the corporate persons, as the case may be and If aggregate dues of operational creditor are equal to or greater than 10% then notice will also be served to them also.
What is the requirement of quorum for a valid conduct of meeting?
If member having 33% voting rights are present either in personal or by audio/video means; then it will be treated as valid quorum for conducting a valid meeting.
What if meeting requisite quorum is not present?
If the requisite quorum as describe above is not present for committee of creditors meeting than meeting cannot be held and the meeting will automatically stand adjourned at the same time and place on the next day.
Whether in adjourned meeting there is requirement of quorum?
In adjourned meeting the members of committee of creditor attending meeting will be treated as adequate quorum.
Procedure after submission of Resolution Plan.
Once the resolution plan is submitted following process will be undertaken; such plan if approved by committee of creditors; it will be submitted to adjudicating authority. If adjudicating authority is satisfied then it will pass the order which will be binding on corporate debtor and its employees, members, creditors, guarantors and other stakeholders involved in the resolution plan. On the other side if adjudicating authority is not satisfied then it may, by an order reject the resolution plan.
Whether after approval of resolution plan appeal can be filed? If yes, on which grounds?
Yes, appeal can be filed against the order of adjudicating authority can be filed. On following grounds appeal can be filed;
Whether once application which is accepted by adjudicating authority can be withdrawn?
Yes, the application can be withdrawn if adjudicating authority allows and, in such case, application shall be made by applicant with approval of ninety percent voting share of committee of creditors.