Skip to content

CS Professional · Corporate Restructuring, Valuation and Insolvency · Preparation and Approval of Resolution Plan

In a pre-packaged process of Himalaya Foods Ltd, the plan submitted by the corporate debtor impairs claims of financial creditors, and the plan does not require the promoters to dilute their shareholding, voting or control rights. The CoC wants to approve it. Which statement is correct?

The CoC must record its reasons for approval before approving the plan. When a plan impairs claims, the CoC may require promoters to dilute their holding or control, but if the plan has no dilution, recording reasons beforehand is mandatory.

  1. AApproval is barred because dilution is mandatory whenever claims are impaired
  2. BThe CoC must record reasons for its approval before approving the planCorrect
  3. CThe Adjudicating Authority must record the reasons after approval
  4. DNo requirement applies, as dilution is purely at the promoters' option

Explanation

Section 54K(14) lets the CoC require promoters to dilute where the plan impairs claims. The proviso provides that if the plan has no dilution, the CoC shall, prior to approval, record reasons for its approval. Dilution is not mandatory, so the first option is wrong.

Did you get it right without looking?

One question tells you little. A timed set on Preparation and Approval of Resolution Plan shows your real accuracy, how long you take and where you lose marks.

Practise Preparation and Approval of Resolution PlanFree diagnostic mock

More Preparation and Approval of Resolution Plan questions