Committee of Creditors – Corporate Restructuring, Insolvency, Liquidation & Winding-Up Important Questions
Question 1.
A resolution plan has been submitted in respect of the company PQR Ltd. and the resolution plan is yet to be confirmed. The committee of creditors resolved to liquidate PQR Ltd. approved by not less than sixty-five percent of the voting share. Can liquidation be ordered?
Answer:
- Part II of the Insolvency and Bankruptcy Code, 2016 lays down the law relating to liquidation process for corporate persons.
- Firstly, an attempt is made to resolve the insolvency of the Corporate
Debtor through the Corporate Insolvency Resolution Process. The Liquidation provisions come into effect if the attempts to resolve corporate insolvency fails. - Section 33 of the Insolvency and Bankruptcy Code, 2016 a resolution professional may intimate the Adjudicating Authority about the decision of the committee of creditors to liquidate the corporate debtors.
- The decision by the committee of creditors shall be approved by not less than 66% of the voting share. On receiving the resolution, the Adjudicating Authority shall pass a liquidation order.
- In the given question the approval of the resolution to liquidate PQR Ltd. by the creditors having 65% of the voting share is not sufficient.
- The decision of the committee of creditors should be approved by not less than 66% of the voting share. Hence, the liquidation of PQR Ltd. cannot be ordered.