Company Law and Practice · Compromise, Arrangement and Amalgamations - Concepts

Procedure for Scheme under Sections 230 to 232 of the Companies Act

Updated 11 October 2026 · Fact-checked

A scheme under section 230 starts with an application to the NCLT. The Tribunal orders meetings of creditors or members. Notice goes to all concerned and to authorities. A majority representing three-fourths in value must approve. The Tribunal then sanctions the scheme, and the company files the order with the Registrar within 30 days.

Understand Procedure for Scheme under Sections 230 to 232

A compromise or arrangement is a settlement a company reaches with its creditors or members, or any class of them. An arrangement also includes reorganising share capital by consolidating shares, dividing shares into classes, or both. The idea is simple: a majority can bind the dissenting minority, but only through a court-supervised process.

The Tribunal (NCLT) supervises everything. Section 230(1) says the Tribunal may, on the application of the company, or of any creditor or member, or of the liquidator if the company is being wound up, order a meeting of creditors, members, or their classes. The Tribunal directs how the meeting is called, held and conducted.

The applicant must be open with the Tribunal. By affidavit, it must disclose all material facts: the latest financial position, the latest auditor's report, and any pending investigation or proceedings. It must also disclose any reduction of share capital included in the scheme. If a corporate debt restructuring scheme is involved, extra items are needed, such as a creditors' responsibility statement, an auditor's liquidity report and a registered valuer's report.

Then comes notice. Everyone affected gets notice individually at the registered address, with a statement explaining the scheme and its effect on creditors, key managerial personnel, promoters, non-promoter members and debenture-holders. Authorities such as the Central Government, income-tax authorities, RBI, SEBI, the Registrar and stock exchanges also get notice. After the vote, the Tribunal sanctions the scheme. Only then is it binding on everyone.

Key rules to remember

Approval majority: Majority in number of persons representing 3/4 in value, voting in person, by proxy or by postal ballot; Section 230(6). Counted separately for each class of creditors or members.
Voting period: Within 1 month from receipt of notice; Section 230(4). Persons may vote themselves, by proxy or by postal ballot.
Right to object: Holders of ≥ 10% of shareholding, or creditors with outstanding debt ≥ 5% of total outstanding debt (latest audited financial statement); Proviso to section 230(4). Others cannot raise objections.
Representations by authorities: Within 30 days of receipt of notice; silence means no representation; Section 230(5). Applies to Central Government, income-tax authorities, RBI, SEBI, Registrar, stock exchanges, Official Liquidator, CCI if necessary, and sectoral regulators.
Dispensing with creditors' meeting: Creditors or class holding ≥ 90% in value confirm by affidavit; Section 230(9). The Tribunal may dispense with that meeting.
Filing of Tribunal order: With Registrar within 30 days of receipt of order; Section 230(8). The company files it.
Corporate debt restructuring consent: Consent of not less than 75% of secured creditors in value; Section 230(2)(c). Needs extra disclosures.

How to solve Procedure for Scheme under Sections 230 to 232 questions

Answer in ICSI style: state the provision, apply it to the facts, then conclude. Follow the order of the process.

1Identify the scheme: is it a compromise or arrangement, with whom (creditors, members or classes), and under section 230.
2State who may apply to the NCLT: the company, any creditor or member, or the liquidator if the company is in winding up.
3List the affidavit disclosures: material facts, latest financials, auditor's report, pending investigations, and any capital reduction.
4Cover notice: individual notice with a statement of effects, website placing, and for listed companies sending to SEBI and stock exchanges; also notice to the authorities with 30 days for representations.
5State voting: one month to vote, majority in number representing three-fourths in value, class by class; objections only by 10% shareholders or 5% debt holders.
6Explain sanction: Tribunal order, auditor's accounting-standards certificate, and binding effect on all.
7Close with filing the order with the Registrar within 30 days and give a clear conclusion on the facts.

Quickest way: Five-checkpoint scheme answer

When to use it: Use when the question asks you to list steps, or tests one number such as the majority, the objection threshold or a time limit.

Apply to NCLT, which orders meetings.
Affidavit disclosure, then notice to all and to authorities.
Vote: majority in number, three-fourths in value, within one month.
Objection only by 10% shareholders or 5% debt holders; authorities have 30 days.
Sanction, auditor's certificate, and filing with the Registrar in 30 days.

Common mistakes in Procedure for Scheme under Sections 230 to 232

Writing that the majority is three-fourths in number.
Students merge the two tests into one.
Fix: Write both: a majority of persons, representing three-fourths in value.
Mixing up the 10% and 5% objection thresholds.
Both numbers appear in one proviso.
Fix: 10% is for shareholding, 5% is for outstanding debt.
Saying only members need notice.
Students think of a general meeting notice.
Fix: Notice goes to creditors, members and debenture-holders, and also to authorities like RBI, SEBI and the Registrar.
Confusing the 30-day periods.
There are several 30-day limits.
Fix: Authorities have 30 days to make representations; the company has 30 days to file the Tribunal's order. The voting period is one month.
Forgetting the auditor's certificate.
It sits in a proviso to section 230(7).
Fix: Say the Tribunal cannot sanction without the auditor's certificate that the accounting treatment follows the standards under section 133.
Treating the creditors' meeting as always mandatory.
Students miss section 230(9).
Fix: Mention that the Tribunal may dispense with it if creditors holding at least 90% in value confirm by affidavit.

Worked examples

Example 1

Rohan Textiles Ltd. proposes an arrangement with its unsecured creditors. At the Tribunal-ordered meeting, 40 creditors vote. 28 vote in favour, and they hold 80% of the value of debt of those voting. Is the scheme approved by the creditors?

Show the solution

Provision: section 230(6) needs a majority of persons representing three-fourths in value of those voting.
Number test: 28 of 40 is a majority.
Value test: three-fourths is 75%. The 28 hold 80%, which is more than 75%.
Both tests are met.

Answer: Yes. Both the number test and the three-fourths value test are met. The scheme still needs Tribunal sanction before it binds all creditors.

Example 2

Sundaram Foods Ltd. has 1,00,000 shares. Shareholders holding 6,000 shares object to the scheme, and a creditor owed 3% of total outstanding debt also objects. Can they validly object?

Show the solution

Provision: the proviso to section 230(4) allows objections only from holders of not less than 10% of shareholding or creditors with not less than 5% of total outstanding debt.
Shareholders: 6,000 of 1,00,000 is 6%, which is below 10%.
Creditor: 3% is below 5%.
Neither meets the threshold.

Answer: Neither objection is valid under the proviso. They may still vote at the meeting, but cannot raise formal objections.

Exam tips

Learn the numbers in one list: 3/4 value, 1 month, 10%, 5%, 30 days, 90%.
Write the steps in sequence: application, affidavit, meeting, notice, vote, sanction, filing.
Quote the section number, such as section 230(6) for the majority, to earn marks.
In case questions, calculate both the number and the value tests before concluding.
Mention that the auditor's certificate on accounting standards is needed before sanction.

Practice questions from Compromise, Arrangement and Amalgamations - Concepts

Procedure for Scheme under Sections 230 to 232: frequently asked questions

What majority is needed to approve a scheme under section 230?

A majority of persons representing three-fourths in value of the creditors or members, or the class, voting in person, by proxy or by postal ballot. Each class votes separately.

Who can object to a scheme?

Only persons holding at least 10% of the shareholding, or creditors with outstanding debt of at least 5% of the total outstanding debt as per the latest audited financial statement.

Who must get notice of the meeting?

All creditors, members and debenture-holders, individually. Notice with documents also goes to the Central Government, income-tax authorities, RBI, SEBI, Registrar, stock exchanges and the Official Liquidator, among others.

When does the scheme become binding?

After the required majority approves it and the Tribunal sanctions it by order. It then binds the company, all creditors or members, and the liquidator and contributories if the company is being wound up.

What must the company do after the Tribunal's order?

It must file the order with the Registrar within 30 days of receiving it.