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

Forty days after the pre-packaged insolvency commencement date of Sagar Foods Pvt Ltd, the CoC votes on terminating the PIRP. No plan has yet been approved. 70% of voting shares favour termination. What is the legal consequence?

The termination is valid. A CoC decision backed by at least 66% of voting shares, taken before plan approval, is intimated by the resolution professional to the Adjudicating Authority, which shall then pass the termination order under Section 54N.

  1. AThe resolution is invalid because termination needs unanimity
  2. BThe resolution professional intimates the Adjudicating Authority, which shall pass a termination orderCorrect
  3. CThe vote is ineffective until the ninety days have elapsed
  4. DThe corporate debtor's promoters must approve the termination by special resolution

Explanation

Section 54N(2) allows the CoC, at any time after commencement and before plan approval, to decide termination by not less than 66% of voting shares. On intimation by the resolution professional, the Adjudicating Authority shall pass the order. 70% exceeds 66%, and no waiting period applies.

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