Continuing with efforts to make insolvency process more smooth, the IBBI has proposed allowing Committee of Creditors (CoC) to vote simultaneously on two or more resolution plans for a company.
The Insolvency and Bankruptcy Code (IBC) aims at time-bound and market-linked resolution of stressed entities.
The Insolvency and Bankruptcy Board of India (IBBI) implements the Code and the Committee of Creditors (CoC) of a company has a key role in the resolution process.
Issuing a discussion paper, the IBBI has proposed three changes in regulations — replacement of authorised representative, voting by class of creditors at two stages and voting on two or more compliant resolution plans simultaneously.
In cases where more than one compliant resolution plans are available, both the plans should be put to vote simultaneously by the CoC, as per the discussion paper.
“The plan that receives the highest affirmative votes, subject to receiving the requisite 66 per cent, may be regarded as approved by the CoC,” it noted.
In case, two or more resolution plans receive equal number of votes, the creditors might be asked to vote for one of them.
“This voting for one of the plans may be conducted simultaneously with the voting for plans making it clear that this will be used as a tie breaker only when there is equality of votes,” IBBI said.
Providing an economic analysis of the proposal, the IBBI said if a resolution plan considered best is not voted in favour by the CoC based on their commercial wisdom, then the CoC would be required to consider the next best plan.
“This would only delay the process as it may require calling for a fresh CoC meeting provided the statutory maximum time limit has not expired,” it added.
Corporate Professionals Group Founder Pavan Kumar Vijay said the objective of the Code is to find optimal resolution of insolvent companies in a fair manner.
“The requirements of approval of evaluation matrix by CoC, before opening of bids, was to make the acceptance of a resolution plan transparent.
“However, this should not be a hurdle towards the main aim of maximisation of value in resolution. Thus, it is logical to allow voting on all the compliant resolution plans simultaneously and allow CoC to choose the best suited plan,” he said.
Source: LiveMint, February 18, 2020