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COMMITTEE OF CREDITORS UNDER PRE PACKAGED INSOLVENCY PROCESS

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COMMITTEE OF CREDITORS UNDER PRE PACKAGED INSOLVENCY PROCESS
By: Mr.áM. GOVINDARAJAN
July 17, 2021
All Articles by: Mr.áM. GOVINDARAJAN       View Profile
  • Contents

Pre-packaged Insolvency process

The pre-packaged insolvency process shall commence from the date of admission of the application by the Adjudicating Authority.  The pre-packaged insolvency resolution process shall be completed within a period of one hundred and twenty days from the pre-packaged insolvency commencement date.

Appointment of Resolution Professional

The Adjudicating Authority shall, on the pre-packaged insolvency commencement date appoint a Resolution Professional –

  • as named in the application, if no disciplinary proceeding is pending against him; or
  • based on the recommendation made by the Board, if any disciplinary proceeding is pending against the insolvency professional named in the application.

Claims

The corporate debtor shall, within two days of the pre-packaged insolvency commencement date, submit to the resolution professional a list of claims, along with details of the respective creditors, their security interests and guarantees, if any a preliminary information memorandum containing information relevant for formulating a resolution plan.

Committee of creditors

The Resolution Professional shall, within seven days of the pre-packaged insolvency commencement date, constitute a Committee of Creditors, based on the list of claims confirmed.

Where the corporate debtor has only creditors in a class and no other financial creditor who are not related parties of the corporate debtor, the Committee of Creditors shall consist of only the authorized representative.

If the corporate debtor has no financial creditor or all financial creditors are related parties the Committee of Creditors shall consist of the operational creditor not related party.  In such cases the Committee of Creditors shall consist of-

  • ten largest operational creditors by value, and if the number of operational creditors is less than ten, the Committee of Creditors shall include all such operational creditors;
  • one representative elected by all workmen other than those workmen; and
  •  one representative elected by all employees other than those employees.

Decisions by Committee of Creditors

All decisions of the Committee of Creditors shall be taken by a vote of not less than 51% of voting share of the financial creditors.     The Committee of Creditors shall have the right to require the Resolution Professional to furnish any financial information in relation to the corporate debtor at any time during the corporate insolvency resolution process.   The Resolution Professional shall make available any financial information so required by the Committee of Creditors within a period of seven days of such requisition.

Voting rights

A member of the Committee of Creditors shall have voting rights in proportion of the debt due to such creditor or debt represented by such representative, as the case may be, to the total debt.  The Committee of Creditors and its members shall have the same rights, powers, duties and obligations as a Committee of Creditors comprising financial creditors and its members.

Change in Committee of Creditors

Any change in the composition of Committee of Creditors shall be intimated to all the members of the Committee of Creditors within two days of such change.

Meeting of the Committee of Creditors

The Resolution Professional is to convene the meeting of the Committee of Creditors as and when he considers necessary.  If there is a request from the members of the Committee representing 33% of voting share the Resolution Professional shall convene the meeting. 

Notice,  in writing, of not less than three days to such other period of not less than twenty-four hours, as it deems fit,  is to be given to every participant to the address provided by the Corporate debtor to the Resolution Professional.  Shorter notice not less than forth eight hours if there is any authorized representative in the Committee of Creditors.

The notice may be sent by email to the participants.  The obligation of the resolution professional shall be satisfied when he transmits the e-mail and he shall not be held responsible for a failure in transmission beyond his control.  The recipient should be able to obtain and retain copies and the resolution professional shall give the complete Uniform Resource Locator or address of the website and full details of how to access the document or information.   If a participant fails to provide or update the relevant e-mail address to the resolution professional, the non-receipt of such notice by such participant of any meeting shall not invalidate the decisions taken at such meeting.

The notice shall contain the following-

  • venue, the time and date of the meeting;
  •  the option available to them to participate through video conferencing or other audio and visual means and shall also provide all the necessary information to enable participation through video conferencing or other audio and visual means;
  • it shall provide that a participant may attend and vote in the meeting either in person or through a representative, who is not a related party of the corporate debtor;
  • if a representative is proposed to attend and vote in the meeting he may be duly authorized in this behalf by the member;
  •  a list of the matters to be discussed at the meeting;
  • a list of the issues to be voted upon at the meeting;
  •  copies of all documents relevant to the matters to be discussed and the issues to be voted upon at the meeting;
  • state the process and manner for voting by electronic means and the time schedule, including the time period during which the votes may be cast;
  • provide the login ID and the details of a facility for generating password and for keeping security and casting of vote in a secure manner; and
  • provide contact details of the person who will address the queries connected with the electronic voting.

Quorum

The quorum of the meeting shall be representing at least thirty three percent of the voting share are present either in person or by video conferencing or other audio and visual means.  The Committee of Creditors may modify the percentage of voting share required for quorum in respect of any future meetings of the committee.  If there is no quorum the meeting shall automatically stand adjourned at the same time and place on the next day.  In the adjourned meeting the members present in the meeting will form the quorum.

Participation through video conferencing

The Resolution Professional shall provide the participants an option to attend the meeting through video conferencing or other audio and visual means to ensure uninterrupted and clear video or audio and visual connection.  The Resolution Professional shall ensure-

  • to safeguard the integrity of the meeting by ensuring sufficient security and identification procedures;
  •  to record proceedings and prepare the minutes of the meeting;
  • to store for safe keeping and marking the physical recording(s) or other electronic recording mechanism as part of the records of the corporate debtor; and
  • to ensure that no person other than the intended participants attends or has access to the proceedings of the meeting through video conferencing or other audio and visual means.

The scheduled venue of the meeting as set forth in the notice convening the meeting, which shall be in India, shall be deemed to be the place of the said meeting and all recordings of the proceedings at the meeting shall be deemed to be made at such place.

In the meeting

  • The Resolution Professional shall act as the chairperson of meetings of the committee. 
  • At the commencement of a meeting, the Resolution Professional shall take a roll call of every participant attending the meeting at the venue or participating through video conferencing or other audio and visual means and shall state the details of participant.
  • The Resolution Professional shall inform the participants of the names of all persons who are present for the meeting and confirm if the required quorum is complete.
  • The Resolution Professional shall ensure that the required quorum is present throughout the meeting.
  • From the commencement of the meeting till its conclusion, no person other than the participants and any other person whose presence is required by the Resolution Professional shall be allowed access to the place where meeting is held or to the video conferencing or other audio and visual facility.
  • He shall ensure that the minutes of the meetings are recorded which shall disclose the particulars of the participants who attended the meeting in person, through video conferencing, or other audio and visual means.

Voting

The Resolution Professional shall take a vote of the members of the committee present in the meeting, on any item listed for voting after discussion on the same. The authorized representative, if any, shall cast his vote in respect of each financial creditor or on behalf of all financial creditors he represents The Resolution Professional shall announce the decision taken by the members present in the meeting, on items along with the names of the members of the committee who voted for or against the decision or abstained from voting.

Circulation of minutes

The Resolution Professional shall circulate the minutes of the meeting by electronic means to all members of the committee and authorized representative, within twenty-four hours of the conclusion of the meeting.  The Resolution Professional shall seek a vote of the members who did not vote at the meeting on the matters listed for voting, by electronic voting system where the voting shall be kept open for at least twenty-four hours from the circulation of the minutes.  At the end of the voting period, the voting portal shall forthwith be blocked.  The Resolution Professional shall announce and make a written record of the summary of the decision taken on a relevant agenda item along with the names of the members of the committee who voted for or against the decision or abstained from voting.  The Resolution Professional shall circulate a copy of the record to all participants by electronic means within twenty-four hours of the conclusion of the voting.

Vesting of management

Where the Committee of Creditors, at any time during the pre-packaged insolvency resolution process period, by a vote of not less than 66% of the voting shares, resolves to vest the management of the corporate debtor with the resolution professional, the Resolution Professional shall make an application for this purpose to the Adjudicating Authority, in such form and manner as may be specified.

Base Resolution Plan

The corporate debtor shall submit the base resolution plan, to the Resolution Professional within two days of the pre-packaged insolvency commencement date, and the Resolution Professional shall present it to the committee of creditors.   The Committee of Creditors may provide the corporate debtor an opportunity to revise the base resolution plan prior to its approval or invitation of prospective resolution applicants.

The Committee of Creditors may approve the base resolution plan for submission to the Adjudicating Authority if it does not impair any claims owed by the corporate debtor to the operational creditors.

If the Committee of Creditors does not approve the base resolution plan or the base resolution plan impairs any claims owed by the corporate debtor to the operational creditors,  the Resolution Professional shall invite prospective resolution applicants to submit a resolution plan or plans, to compete with the base resolution plan.

Where the resolution plan submitted by the corporate debtor provides for impairment of any claims owed by the corporate debtor, the Committee of Creditors may require the promoters of the corporate debtor to dilute their shareholding or voting or control rights in the corporate debtor. If the resolution plan does not provide for such dilution, the committee of creditors shall, prior to the approval of such resolution plan record reasons for its approval.

Approval of resolution plan

The resolution plans selected by the Resolution Professional shall be considered by the Committee of Creditors for approval, if it is significantly better than the base resolution plan.  The Resolution Professional shall present to the committee of creditors, for its evaluation, resolution plans.  The committee of creditors shall evaluate the resolution plans presented by the and select a resolution plan from amongst them. 

If no resolution plan is received which complies with the requirements of the Code and these Regulations, the base resolution plan may be considered by the Committee of Creditors for approval.   The resolution plan having higher score on completion of process of improvement shall be considered by the committee for approval.  

The approval of the resolution plan by the Committee of cCeditors, shall be by a vote of not less than 66% of the voting shares, after considering its feasibility and viability, the manner of distribution proposed, taking into account the order of priority amongst creditors including the priority and value of the security interest of a secured creditor and such other requirements as may be specified.

Where a resolution plan is approved by the Committee of creditors, the Resolution Professional shall submit an application, along with a compliance certificate in Form P12, to the Adjudicating Authority for approval.  Where no resolutions plan is approved by the Committee of Creditors or where the Committee of Creditors has approved the termination of process, the Resolution Professional shall file an application in Form P13 to the Adjudicating Authority for termination of process.

Initiation of Corporate Insolvency Resolution Process

The Committee of Creditors, at any time after the pre-packaged insolvency commencement date but before the approval of resolution plan, by a vote of 66% of the voting shares, may resolve to initiate a corporate insolvency resolution process in respect of the corporate debtor, if such corporate debtor is eligible for corporate insolvency resolution process.

 

By: Mr.áM. GOVINDARAJAN - July 17, 2021

 

 

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