CS Professional · Corporate Restructuring, Valuation and Insolvency

Resolution Strategies for CS Professional: Chapter Guide

Resolution strategies cover how a company in the corporate insolvency resolution process is steered towards a rescue. You learn who appoints the resolution professional, what the professional must do, how the committee of creditors votes on a plan, and how the Adjudicating Authority approves it. Solve questions by applying provision, facts, conclusion.

What this chapter covers

This chapter follows the corporate insolvency resolution process after the interim resolution professional is in place. It starts with the first meeting of the committee of creditors and the decision on who acts as resolution professional. It then covers what that professional does, how resolution plans reach the committee, how they are voted on, and how the Adjudicating Authority finally approves them. It ends with the wider choice of restructuring options.

The sections are short, but exams test the exact conditions. Under Section 22, the first meeting of the committee of creditors is held within seven days of its constitution. The committee can appoint the interim resolution professional as resolution professional, or replace that person, by a vote of not less than 66 per cent of the voting share of the financial creditors. A replacement goes through the Adjudicating Authority and the Board. Section 23 gives the resolution professional charge of the entire process and the running of the business. Section 25 lists the duties. Section 31 deals with approval of the plan by the Adjudicating Authority.

This chapter links the other two parts of Paper 6. Corporate Restructuring supplies the tools, such as mergers, demergers and sale of business, that a plan may use. Valuation supplies the numbers the committee relies on. Insolvency, Liquidation and Winding Up picks up where the process fails, because the resolution professional keeps managing the company until the plan is approved or a liquidator is appointed. Learn this chapter as one timeline, not as four separate sections.

Paper 6 is written and case-based, and Insolvency, Liquidation and Winding Up carries 40 of its 100 marks. A chapter like this suits problem questions: a company, a creditor vote, a replaced professional, a plan with a competition angle. You earn marks by quoting the right condition, applying it to the facts and reaching a clear conclusion. Numbers such as seven days, 66 per cent, ten days and one year are easy to remember and easy to lose marks on if you get them wrong.

Resolution Strategies: topics in the order to study them

1Appointment of Resolution Professional (Section 22)It is the starting point of the timeline: the first committee meeting, the 66 per cent vote, and the route for replacing the interim professional.
2Duties of Resolution Professional (Section 23)Once you know who is appointed, learn what that person does: Section 23 on conducting the process and Section 25 on the specific duties.
3Committee of Creditors and Resolution Plan ApprovalThe professional presents plans to the committee, so learn the voting, the approval by the Adjudicating Authority under Section 31 and the contrast with a pre-packaged process under Section 54K.
4Resolution Strategies and Restructuring OptionsStudy this last, because you can now see which restructuring tools a plan can use and how they fit into the approved process.

How to prepare Resolution Strategies

Treat this chapter as a sequence of events with a rule at each step. Your aim is to state the rule exactly and apply it to facts.

Draw a one-page timeline: constitution of the committee, first meeting within seven days, appointment of the professional, plans, committee vote, Adjudicating Authority order.
Read Sections 22, 23, 25 and 31 in the Code itself. Underline every number, time limit and condition, then write each as a one-line rule in your own words.
Make a table for yourself of who does what: the committee, the resolution professional, the Adjudicating Authority and the Board. Most case questions turn on this.
Learn Section 54K as a contrast to the normal process: base plan within two days, challenge plans, the 66 per cent vote and the promoter dilution condition.
Revise the restructuring tools from the Corporate Restructuring part and note which can sit inside a resolution plan.
Practise three or four case questions in the format provision, facts, conclusion. Write a short answer in the time you would have in the exam.
Do a last-day pass using the quick revision points and check you can recite each number without looking.

Common mistakes in Resolution Strategies

Writing the wrong voting threshold or applying it to the wrong creditors
Fix: Remember that the appointment vote is not less than 66 per cent of the voting share of the financial creditors, and use the same figure for plan approval in a pre-packaged process under Section 54K.
Saying the Adjudicating Authority appoints a replacement professional on its own
Fix: Write the full chain: committee resolves, application to the Adjudicating Authority, name sent to the Board, appointment after confirmation, and the ten-day fallback.
Stating that the professional's role ends when the process period ends
Fix: Quote the proviso to Section 23(1): the professional continues to manage the company until the Section 31(1) approval order or the appointment of a liquidator.
Mixing up Section 23 and Section 25
Fix: Link Section 23 to conducting the process and managing operations. Link Section 25 to the list of specific duties. Cite both when a question asks about duties.
Treating approval by the committee as the end of the process
Fix: Finish every plan answer with Section 31: the Adjudicating Authority must be satisfied, the plan must have provisions for effective implementation, and only then does it bind the stakeholders.
Giving a general answer without applying the facts
Fix: Begin with the provision, name the facts that matter, test each condition, then give a one-line conclusion.

Last-day revision: Resolution Strategies

The first meeting of the committee of creditors is held within seven days of its constitution (Section 22).
The committee can appoint the interim professional as resolution professional, or replace that person, by not less than 66 per cent of the voting share of the financial creditors.
Continuing the interim professional needs that person's written consent in the specified form. A proposed replacement's written consent goes with the application to the Adjudicating Authority.
For a replacement, the Adjudicating Authority forwards the name to the Board and appoints only after the Board confirms.
If the Board does not confirm within ten days, the Adjudicating Authority directs the interim professional to continue until the Board confirms.
The resolution professional conducts the entire process and manages the company's operations, and continues to do so after the process period ends until an order under Section 31(1) or the appointment of a liquidator.
The core duty under Section 25 is to preserve and protect the assets, including the continued business operations.
Section 25 duties include taking custody of assets, maintaining an updated list of claims, preparing the information memorandum and presenting all plans to the committee.
Interim finances need the approval of the committee of creditors.
Under Section 31, the Adjudicating Authority approves a plan that meets the requirements, and the plan then binds the company, employees, members, creditors (including Government authorities owed statutory dues), guarantors and other stakeholders.
After approval, the moratorium ceases and the professional sends all records to the Board.
The resolution applicant must get the approvals needed under other laws within one year of the approval, or the period in that law if later. A combination needs Competition Commission approval before the committee approves the plan.

Resolution Strategies practice questions

Resolution Strategies in other exams

The same ground in other exams, if you are preparing for more than one or want another angle on it.

CMA FinalInsolvency and Bankruptcy Code, 2016

Resolution Strategies: frequently asked questions

What is covered in the Resolution Strategies chapter of CS Professional?

It covers the appointment of the resolution professional, the professional's duties, the committee of creditors and plan approval, and the restructuring options a resolution plan can use. It belongs to Paper 6, Corporate Restructuring, Valuation and Insolvency.

Who appoints the resolution professional under Section 22?

The committee of creditors decides, in its first meeting, by a vote of not less than 66 per cent of the voting share of the financial creditors. It can continue the interim professional or replace that person. A replacement is appointed by the Adjudicating Authority after the Board confirms the name.

What if the Board does not confirm the proposed professional?

If the Board does not confirm the name within ten days of receiving it, the Adjudicating Authority directs the interim professional to continue as resolution professional. This continues until the Board confirms the appointment of the proposed professional.

Does the resolution professional stop acting when the resolution process period ends?

No. The proviso to Section 23(1) says the professional continues to manage the company's operations until the Adjudicating Authority passes an order approving the plan under Section 31(1) or appoints a liquidator under Section 34.

How should I answer a case question from this chapter?

State the relevant provision with its exact conditions, apply it to the facts given, and end with a clear conclusion. Keep the answer short and structured, and use the section number only where you are sure of it.