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CS Professional · Corporate Restructuring, Valuation and Insolvency · Pre-Packaged Insolvency Resolution Process

Before filing for PPIRP, Himalaya Polymers Ltd gave its unrelated financial creditors the directors' declaration, the members' special resolution and a base resolution plan, and sought their approval to file the application. Which statement about the approval required under section 54A(3) is correct?

The corporate debtor must obtain approval for filing the application from unrelated financial creditors representing not less than sixty-six per cent in value of the financial debt due to such creditors. Related parties are excluded and the test is by value, not number.

  1. AApproval of financial creditors, not being related parties, representing not less than 66% in value of the financial debt due to such creditorsCorrect
  2. BApproval of all financial creditors including related parties by simple majority in number
  3. CApproval of operational creditors holding at least 50% in value of operational debt
  4. DApproval of the Adjudicating Authority before the creditors are approached

Explanation

Section 54A(3) requires approval from financial creditors who are not related parties, representing not less than 66% in value of the financial debt due to them. Related parties are excluded, the test is by value, and it is creditors, not operational creditors or the Adjudicating Authority, who approve at this stage.

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