Evaluation of Resolution Plans by the Committee of Creditors (CoC)
In the Insolvency and Bankruptcy Code (IBC), the Committee of Creditors (CoC) plays a pivotal role in the resolution process. One of its most critical functions is the evaluation and approval of resolution plans submitted by prospective resolution applicants. This stage is crucial as it determines the future of the corporate debtor and the recovery prospects for creditors.
The Role of the CoC in Plan Evaluation
The CoC, comprising financial creditors, is empowered to assess the viability and feasibility of a resolution plan. This evaluation is not merely a rubber-stamping exercise; it involves a thorough examination of the plan's financial, operational, and legal aspects to ensure it maximizes the value of the corporate debtor's assets and is in the best interest of all stakeholders.
Key Criteria for Evaluation
The IBC provides a framework for the CoC's evaluation. A resolution plan must meet several key criteria to be considered by the CoC:
| Criterion | Description |
|---|---|
| Financial Viability | The plan must demonstrate a clear path to financial sustainability and profitability for the corporate debtor. |
| Operational Feasibility | The plan should outline a practical and achievable strategy for the continued operation and management of the business. |
| Maximization of Value | The plan should aim to realize the highest possible value for the corporate debtor's assets, considering both liquidation value and going concern value. |
| Compliance with Law | The plan must adhere to all applicable laws and regulations. |
| Fair Distribution | The plan should propose a fair and equitable distribution of proceeds among the financial and operational creditors. |
The Voting Process
Once the CoC has evaluated the resolution plans, it proceeds to a voting process. A resolution plan is approved if it receives a vote in favour from at least 66% of the voting share of the financial creditors, as mandated by the IBC. This supermajority requirement ensures that significant consensus is achieved before a plan is adopted.
The 66% voting threshold is a critical safeguard, ensuring that only plans with broad creditor support can move forward, thereby promoting stability and confidence in the resolution process.
Role of the Resolution Professional (RP)
The Resolution Professional acts as a facilitator throughout this process. The RP presents the resolution plans to the CoC, provides necessary information and clarifications, and manages the voting process. The RP's role is to ensure transparency and adherence to the IBC's provisions.
Approval and Implementation
Upon approval by the CoC, the resolution plan is submitted to the Adjudicating Authority (National Company Law Tribunal - NCLT) for final approval. The NCLT reviews the plan to ensure it meets the requirements of the IBC and is not against public interest. Once approved by the NCLT, the plan becomes binding on all stakeholders, and its implementation commences.
At least 66% of the voting share of the financial creditors.
Challenges in Plan Evaluation
The evaluation of resolution plans can be complex, often involving intricate financial models, operational restructuring, and legal nuances. Disagreements among CoC members, differing interpretations of the IBC, and the pressure to achieve a quick resolution can also pose challenges. The NCLT's role is crucial in resolving disputes and ensuring the integrity of the process.
The resolution process under the IBC can be visualized as a funnel. At the top, multiple resolution applicants submit plans. The CoC, acting as a filter, evaluates these plans based on predefined criteria. Only plans that meet the stringent requirements and secure the necessary voting threshold pass through to the next stage, which is the Adjudicating Authority's approval. This structured approach aims to ensure that only viable and beneficial plans are implemented, thereby facilitating the revival of distressed companies.
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Learning Resources
The official source for the Insolvency and Bankruptcy Code, 2016, providing the complete legal framework for insolvency and bankruptcy proceedings in India.
Access to various regulations framed by IBBI, which provide detailed procedural guidelines for different aspects of the insolvency and bankruptcy process, including resolution plan evaluation.
An insightful article explaining the composition, powers, and functions of the Committee of Creditors, with a focus on their role in resolution plan approval.
A detailed guide covering the entire lifecycle of resolution plans, from submission to approval, including the CoC's evaluation process.
Access to judgments delivered by the National Company Law Tribunal (NCLT), which often interpret and clarify the nuances of resolution plan evaluation and approval.
Explains the critical role of the Resolution Professional in facilitating the resolution process, including presenting and managing resolution plans for CoC evaluation.
A focused article detailing the specific powers and duties of the CoC, particularly concerning the evaluation and voting on resolution plans.
Key Supreme Court judgments that have shaped the interpretation and application of the IBC, including significant rulings on resolution plan approval.
A video tutorial explaining the stages of the IBC resolution process, with emphasis on the CoC's role in evaluating and approving resolution plans. (Note: Replace 'example_video_id' with a relevant actual video URL if available).
Discusses common challenges and complexities faced during the evaluation and approval of resolution plans by the CoC and NCLT.