Resolution Plan Process under IBC

 

Resolution Plan Process under IBC

A resolution plan is the key component in the Corporate Insolvency Resolution Process (CIRP). This plan is meant to revive the company by restructuring its debt, bringing in a new investor, or selling the company to a bidder. The Committee of Creditors (CoC) is responsible for reviewing, approving, and ultimately deciding whether to accept or reject the plan.

A. Submission of Resolution Plan

1. Debtor’s Right to Propose:

   • Under Section 29A of the IBC, the debtor, along with its management, can submit a resolution plan if it is eligible and not disqualified.

   • The debtor can also work with potential investors or third-party bidders to propose a resolution plan.

2. Resolution Applicants:

   • Any third-party investor or bidders (who meet the eligibility criteria under Section 29A) may submit a resolution plan.

   • These plans should aim at ensuring the company’s revival, including restructuring the company’s debts, and must be submitted within the time frame prescribed by the IBC (180 days, extendable by 90 days).

B. Role of Committee of Creditors (CoC) in Reviewing the Resolution Plan

1. CoC’s Review Process:

   • The CoC reviews the resolution plan based on the following criteria:

     • Feasibility and Viability: Can the resolution plan realistically help the company recover and continue operations?

     • Repayment to Creditors: The plan must ensure that the creditors receive at least the liquidation value (the minimum amount they would receive if the company were liquidated).

     • Compliance with IBC: The plan must comply with the IBC provisions and protect the interests of all creditors.

2. Approval or Rejection of Resolution Plan:

   • After reviewing the resolution plan, the CoC votes on it.

   • The plan can only be approved if it receives at least 75% voting share of the CoC members (based on the value of their claims).

   • If the plan is rejected, the company moves towards liquidation, unless the CoC decides to extend the process or invite new resolution plans.

3. Submission to NCLT:

   • If approved by the CoC, the resolution plan is submitted to the National Company Law Tribunal (NCLT) for its final approval.

   • The NCLT ensures that the plan complies with the IBC and public interest before approving it.