Resolution Strategies (Elective 7.5): formula sheet

Key formulas

Timing of first CoC meeting

First CoC meeting ≤ 7 days from constitution of the CoC

Section 22(1). The meeting is where the RP question is decided.

Voting threshold

Vote ≥ 66% of the voting share of the financial creditors

Section 22(2). Applies both to continuing the IRP and to replacing him.

Route A: continue the IRP

CoC resolves → IRP's written consent → decision communicated to IRP, corporate debtor and Adjudicating Authority

Section 22(3)(a). No Board confirmation step is stated in this route.

Route B: replace the IRP

CoC resolves → application to Adjudicating Authority with proposed RP's written consent → name sent to Board → appointment after confirmation

Section 22(3)(b) and (4).

Board confirmation period

Board to confirm within 10 days of receiving the name; if not, the IRP continues as RP until confirmation

Section 22(5). The Adjudicating Authority orders the IRP to continue.

Later replacement of RP

CoC vote of 66% of voting shares + written consent of proposed RP → name to Adjudicating Authority → Board confirmation

Section 27. This applies to replacing an RP already appointed under Section 22.

Core duty under Section 23(1)

RP conducts the entire CIRP + manages the operations of the corporate debtor during the CIRP period (subject to Section 27)

Quote both limbs: process and operations. Mention Section 27, which deals with the CoC replacing the RP.

Inherited powers, Section 23(2)

RP powers and duties = powers and duties of the IRP under the Chapter

Use this to bring in Section 20 on going concern, contracts, professionals and interim finance.

Continuation after the CIRP period

RP continues to manage the debtor until an order under Section 31(1) (plan approved) or Section 34 (liquidator appointed)

The CIRP period expiring does not end the RP's management role.

Handover, Section 23(3)

Where an RP is appointed under Section 22(4), the IRP gives the RP all information, documents and records in his possession and knowledge

This is a duty of the IRP, not the RP.

Interim finance security rule, Section 20(2)(c)

No security over encumbered property without prior consent of the secured creditors, unless property value ≥ 2 × the secured debt

The twice-the-debt test removes the consent requirement.

Cost approval, Regulation 31B

Costs till the first CoC meeting: placed for approval at that meeting. After it: only with prior CoC approval

Also a Going Concern Assessment Report is placed at the first meeting, and the CoC decides on continuing operations.

Section 30(2) screening conditions

Plan must: (a) pay CIRP costs in priority; (b) pay operational creditors and dissenting financial creditors at least the liquidation-based minimum; (c) provide for management after approval; (d) provide for implementation and supervision; (e) not contravene any law; (f) meet Board requirements

The resolution professional confirms these before placing the plan before the CoC (Section 30(3)).

Operational creditors' minimum payment

Payment ≥ higher of (i) amount in liquidation under Section 53, and (ii) amount if the plan's distributable amount were paid in Section 53(1) order of priority

Section 30(2)(b). Take the higher of the two, not the lower.

Dissenting financial creditors' minimum

Payment ≥ amount they would get under Section 53(1) in liquidation

Applies to financial creditors who do not vote in favour. Distribution must be fair and equitable (Explanation 1).

CoC approval threshold

Approval by not less than 66% of the voting share of financial creditors

Section 30(4). The CoC considers feasibility, viability and the manner of distribution, which may take into account Section 53(1) priority and the value of security interest.

Resolution applicant at CoC meeting

May attend; no vote unless also a financial creditor

Section 30(5).

Shareholder approvals

If shareholder approval is needed under the Companies Act, 2013 or any other law for implementing the plan, it is deemed given

Explanation to Section 30(2).

Replacement of RP in CIRP (section 27)

CoC vote ≥ 66% of voting shares + written consent of proposed RP

Passed at a CoC meeting. The CoC forwards the name to the Adjudicating Authority, which forwards it to the Board for confirmation.

Who conducts CoC meetings (section 24(2))

All CoC meetings are conducted by the resolution professional

The RP also gives notice and determines voting shares as specified by the Board.

Notice recipients (section 24(3))

CoC members and authorised representatives + suspended directors or partners + operational creditors holding ≥ 10% of the debt

Directors, partners and one operational creditor representative may attend but cannot vote.

Voting share (section 24(6))

Voting share ∝ financial debt owed to the creditor

Each creditor votes in accordance with the share assigned to it.

Continuation during replacement (section 27(5))

Existing RP continues until another professional is appointed

Ensures the process is not left without a professional.

Replacement in individual insolvency (sections 89 and 98)

Application to AA → AA refers to Board within 7 days → Board recommends within 10 days

Section 98(5) and (6) give a second route where the Board confirms or rejects a nominated professional within 10 days.

Replacement of bankruptcy trustee (section 145)

CoC vote of 75% of voting share; AA directs Board within 7 days; Board recommends within 10 days; AA appoints within 14 days

Do not mix this 75% with the 66% in section 27.

Quick revision

• The first CoC meeting must be held within seven days of the CoC's constitution (Section 22).
• In that meeting the CoC can continue the IRP as RP or replace the IRP, by a vote of not less than 66 per cent of the voting share of the financial creditors.
• If the IRP is continued, the CoC communicates its decision to the IRP, the corporate debtor and the Adjudicating Authority, subject to the IRP's written consent in the specified form.
• If the IRP is to be replaced, the CoC applies to the Adjudicating Authority along with the proposed RP's written consent in the specified form.
• The Adjudicating Authority forwards the proposed name to the Board and appoints only after the Board confirms.
• If the Board does not confirm within ten days, the IRP continues as RP until the Board confirms the proposed RP.
• The RP conducts the entire process and manages the operations of the corporate debtor (Section 23), subject to Section 27.
• The RP continues to manage the company after the process period ends, until an order approving the plan or appointing a liquidator is passed.
• Section 25 duties include preserving and protecting assets, taking custody of assets and records, keeping an updated list of claims, convening CoC meetings and preparing the information memorandum.
• The RP raises interim finances only with CoC approval, and invites prospective resolution applicants on criteria approved by the CoC.
• The RP presents all resolution plans at CoC meetings and files applications for avoidance of transactions.
• Under Section 27, the CoC may replace an RP at any time by a vote of 66 per cent of voting shares, with the proposed RP's written consent.

Common mistakes

• Quoting 75% as the vote needed under Section 22. Fix: Write 66% of the voting share of financial creditors, as amended in 2018. Note that 75% is the figure for replacing a bankruptcy trustee under Section 145.
• Counting operational creditors or all creditors in the vote. Fix: The Section 22(2) vote is by the voting share of the financial creditors.
• Saying the RP's role ends when the 180 or 330 day period ends. Fix: Quote the proviso to Section 23(1). The RP manages the debtor until a Section 31(1) or Section 34 order is passed.
• Saying the board of directors continues to manage the debtor in a regular CIRP. Fix: In CIRP, the RP manages the operations. In the pre-pack, management stays with the board and the RP monitors it under Section 54F.
• Saying the CoC approves the plan by a simple majority or 75%. Fix: Write 66% of the voting share of financial creditors, as in Section 30(4).
• Giving operational creditors only the liquidation value. Fix: Section 30(2)(b) requires the higher of the liquidation amount and the amount under the Section 53(1) priority distribution of the plan amount.
• Saying the CoC replaces the RP by a simple majority. Fix: Write 66% of voting shares for section 27, backed by written consent of the proposed professional.
• Treating directors and operational creditor representatives as voting members. Fix: Under section 24(4) they may attend but have no right to vote. Their absence does not invalidate the meeting.

Exam tips

• Write the section number and sub-section for each point. Examiners reward the provision first, then the facts.
• Always state 66% and name financial creditors' voting share. Show the arithmetic against the threshold.
• Keep Route A and Route B separate in your answer. Use short headings in your own writing.
• Mention the ten-day fallback in any question where the Board's confirmation is delayed.
• Link to Section 16 for the IRP's term and Section 27 for later replacement. It shows you know the full scheme.
• Begin every answer with the Section 23(1) wording: conduct the entire CIRP and manage operations. Examiners look for it.
• Always connect Section 23(2) to Section 20. Marks are usually for naming the specific power used.
• Use the facts. If the question gives figures, such as asset value and debt, show the calculation.