Decision-Making Process within the Committee of Creditors (CoC)
The Insolvency and Bankruptcy Code (IBC) of India establishes a structured framework for resolving corporate insolvency. A pivotal element of this framework is the Committee of Creditors (CoC), which plays a crucial role in decision-making during the Corporate Insolvency Resolution Process (CIRP). This module delves into how the CoC operates and makes critical decisions.
Composition and Voting Rights of the CoC
The CoC is constituted by the Insolvency Professional (IP) and comprises financial creditors of the corporate debtor. Each financial creditor's voting share in the CoC is proportionate to the amount of debt owed to them. This ensures that creditors with higher stakes have a greater say in the resolution process.
Key Decisions Made by the CoC
The CoC is empowered to make several critical decisions that shape the trajectory of the CIRP. These decisions are vital for the survival and revival of the corporate debtor.
| Decision Area | CoC's Role | Threshold for Approval |
|---|---|---|
| Approval of Resolution Plan | Reviews and approves or rejects resolution plans submitted by prospective resolution applicants. | 75% of voting share |
| Liquidation | Votes to liquidate the corporate debtor if no viable resolution plan is approved. | 75% of voting share |
| Extension of CIRP Period | Can approve requests for extension of the CIRP period, subject to IBC timelines. | 66% of voting share |
| Appointment/Replacement of RP | Can vote on the appointment or replacement of the Resolution Professional. | 66% of voting share |
The Resolution Plan Approval Process
The most significant decision the CoC makes is the approval of a resolution plan. This plan outlines how the corporate debtor will be revived and its debts repaid. The process involves submission, evaluation, and voting on these plans.
Voting Mechanism and Quorums
The IBC specifies clear rules for CoC meetings and voting. A quorum is necessary for a valid meeting, and decisions are made based on the voting thresholds outlined in the Code.
A quorum for a CoC meeting requires at least 33% of the total voting share of the creditors. Decisions on resolution plans and liquidation require a supermajority of 75%, while other decisions like extending CIRP or replacing the RP need a 66% majority.
Role of the Resolution Professional
The Resolution Professional acts as a facilitator and administrator of the CIRP. They convene CoC meetings, provide necessary information, and ensure that the decision-making process adheres to the IBC provisions.
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Challenges and Considerations
The CoC's decision-making process can be complex, influenced by various factors including creditor alignment, the quality of resolution plans, and potential legal challenges. Ensuring transparency and fairness is paramount.
The decision-making process within the Committee of Creditors (CoC) under the Insolvency and Bankruptcy Code (IBC) can be visualized as a structured negotiation and voting framework. Imagine a boardroom where financial creditors, represented by their voting shares proportional to their debt, deliberate on proposals to revive a struggling company. The Resolution Professional acts as the moderator, presenting options and facilitating the vote. The core of the process involves evaluating resolution plans, which are essentially business revival blueprints. These plans must meet stringent approval thresholds, typically a supermajority (75%) of the CoC's voting power, to be accepted. If no viable plan emerges, the alternative is liquidation, a decision also requiring the same high threshold. This visual highlights the power vested in the CoC and the critical nature of their collective decisions in determining the fate of a corporate debtor.
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Conclusion
The CoC is the linchpin of the CIRP, embodying the collective will of financial creditors. Their informed and timely decisions are crucial for achieving the objectives of the IBC: resolution, revival, and maximization of value.
Learning Resources
The official source for the Insolvency and Bankruptcy Code, 2016, including all amendments and regulations. Essential for understanding the legal framework.
Provides access to various regulations framed by IBBI, which govern the functioning of CIRP, including CoC procedures and voting.
A blog post explaining the composition, powers, and functions of the CoC, offering practical insights into its role.
This article details the significant role and decision-making powers of the CoC throughout the CIRP, highlighting key aspects of its authority.
LiveLaw provides access to numerous judgments from the National Company Law Tribunal (NCLT) and appellate tribunals, offering case-law perspectives on CoC decisions.
A video explanation that breaks down the concept of the Committee of Creditors and its importance in the IBC framework.
This video focuses on the specific powers and functions of the CoC, elaborating on its decision-making authority and responsibilities.
While not specific to Indian IBC, this provides a general understanding of what a committee of creditors is in financial contexts.
An analysis of recent amendments to the IBC and how they affect the powers, procedures, and decision-making of the CoC.
A discussion paper from IBBI that delves into the intricacies of resolution plans, which are central to the CoC's decision-making process.