Status as on- 29/05/2021
A Resolution Plan is a plan proposed by the resolution applicant for initiation of insolvency resolution of the corporate debtor in accordance with Part II. The resolution professional for the purpose of formulation of a resolution plan, prepares an ‘Information Memorandum’ to be submitted to the potential resolution applicants. The resolution professional also prepares a Request for resolution plan/process memorandum which provides the manner in which the entire corporate insolvency resolution process (hereinafter referred to as “CIRP”) will work. The resolution professional collates the documents relating to the corporate debtor for enabling the proposed resolution applicant to do the due diligence. Upon receipt of the resolution plans, the resolution professional shall place it before the Committee of Creditors (hereinafter referred to as “CoC”) for its approval. The approved Resolution Plan is then sent to the Adjudicating Authority for its final approval.
The responsibility of approving a resolution plan rests with the CoC, which approves it with not less than 66 percent voting in favour of it.
A resolution plan under Regulation 37, shall provide for the measures, for insolvency resolution of the corporate debtor for maximization of value of its assets including:
- Transfer of all or part of the assets of corporate debtor to one or more persons,
- Sale of all or part of the assets whether subject to any security interest or not,
- Substantial acquisition of shares of the corporate debtor, or the merger or consolidation of the corporate debtor with one or more persons,
- Cancellation or delisting of any shares of the corporate debtor, if applicable,
- Satisfaction or modification of any security interest,
- Waiving any breach of terms of ay debt due to the corporate debtor,
- Reduction in the amount payable to the creditors.
MANDATORY CONTENTS IN THE RESOLUTION PLAN (REGULATION 38)
- A resolution plan shall contain the amount due to the operational creditors and shall be given priority in payment over financial creditors.
- A resolution plan shall include a statement, representing ways to deal with the interests of all stakeholders, including financial creditors and operational creditors of the corporate debtor.
- A resolution plan shall include a statement, giving details if the resolution applicant or any of its related parties has failed to implement or contributed to the failure of implementation of any other resolution plan approved by the Adjudicating Authority at any time in the past.
ROLE OF RESOLUTION PROFESSIONAL
The role of a resolution professional is not adjudicatory but administrative. It is the responsibility of the resolution professional to manage the affairs of the corporate debtor as a going concern during CIRP, appoint and convene meetings of the CoC, in order to decide upon the resolution plans, and collect, collate and finally admit claims of all creditors, which must be examined for payment, in full or in part or not at all, by the resolution applicant and be finally negotiated by the CoC. The Plan submitted by the prospective resolution applicant must provide for measures as may be necessary, for the initiation of insolvency resolution of the corporate debtor for maximization of the value of its assets, which may include transfer or sale of assets or part thereof, whether subject to security interests or not. The Plan may provide for either satisfaction or modification of any security interest of a secured creditor and may also provide for reduction in the amount payable to different classes of creditors. The prospective resolution applicant has a right to receive complete information as to the corporate debtor, debts owed by it, and its activities as a going concern, prior to the commencement of CIRP.
ROLE OF COMMITTEE OF CREDITORS (CoC)
It is the decision of the CoC, to decide as to whether or not to rehabilitate the corporate debtor by accepting a particular resolution plan. The CoC may approve a resolution plan by a vote of not less than 66% of the voting share of the financial creditors, after considering its feasibility and viability, and various other requirements as may be prescribed by the Regulationsis left to the majority decision of the CoC.
Section 31(1) of IBC, clearly states that once a resolution plan is approved by the CoC, it shall be binding on all stakeholders, including guarantors. Such a provision ensures that the successful resolution applicant starts running the business of the corporate debtor on a fresh slate. It cannot be accepted that part of the resolution plan which states that the claims of the guarantor on account of subrogation shall be extinguished, cannot be applied to the guarantees furnished by the erstwhile directors of the corporate debtor.
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