The Insolvency and Bankruptcy Code (Amendment) has yet again resolved a pertinent issue in respect to the threshold limit of the voting shares of financial creditors at a Committee of Creditors. The earlier requisite number for approval of resolution plan has been reduced from 75% to 66%. In some cases, the number is at 51% depending on the matter in hand.
The amendment addressed important questions in regard to the voting share of financial creditors and their computation. It further asked whether financial creditors who were not members of CoC would be considered abstainees or dissenting.
The Board vide its circular no. IBBI/CIRP/018/2018 dated 14th September, 2018 further clarified the position of such financial creditors with respect to their voting. The Circular while considering Section 21 of the Code states that the CoC should comprise of all financial creditors of the corporate debtors and further clarifies that the CoC is to be constituted of financial creditors whose claims have in fact been admitted.
In order to put other pressing questions to rest, the Amendment clarified the position of financial creditors:
- A financial creditor whose claim has not been admitted can become a member of the CoC as and when its claim is admitted;
- Any subsequent admission of a financial creditor as a member of the CoC does not affect any decision of the CoC taken prior to such admission; and
- A financial creditor who is not a member of the CoC doesn’t have any voting right in the CoC and cannot be regarded as a dissenting financial creditor or a financial creditor who has abstained from voting
However it is important to note that since financial creditors whose claims have not yet been admitted are not dissenting financial creditors and the resolution plan need not mandatorily provide for any payment to such financial creditors.
This brings the much needed clarity in the status of financial creditors and their respective claims. In conclusion, it is mandatory that the admission of claims is the cornerstone of participation in the CoC by financial creditors.