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CS Professional · Insolvency and Bankruptcy - Law and Practice · Pre-Packaged Insolvency Resolution Process (Elective 7.5)

Before filing for a pre-packaged process, Kaveri Engineering Ltd seeks approval of the name of the proposed resolution professional from its financial creditors. Which approval satisfies the requirement in the Code?

The proposal of the insolvency professional must be approved by financial creditors who are not related parties of the corporate debtor, representing not less than sixty-six per cent in value of the financial debt due to such creditors. A simple majority or director approval alone is insufficient.

  1. AApproval by financial creditors, including related parties, holding a simple majority in value
  2. BApproval by financial creditors, not being related parties, representing not less than sixty-six per cent in value of the financial debt due to such creditorsCorrect
  3. CApproval by all unsecured creditors, including operational creditors, by simple majority
  4. DApproval by the majority of directors alone, without any creditor approval

Explanation

Section 54A(2)(e) requires approval of the proposed name by financial creditors who are not related parties and who represent at least 66 per cent in value of the financial debt due to such creditors. A simple majority or counting related parties does not satisfy this.

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