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CS Professional · Corporate Restructuring, Valuation and Insolvency · Resolution Strategies

In the first CoC meeting of Gokul Steels Ltd, financial creditors holding 70% of the voting share vote to replace the interim resolution professional (IRP) with another professional, Mr. Rao. Which statement correctly describes the legal position under Section 22?

The resolution is valid because 70% exceeds the required sixty-six per cent of financial creditors' voting share. To replace the IRP, the CoC must file an application before the Adjudicating Authority along with the proposed professional's written consent in the specified form. Mr. Rao does not take charge immediately.

  1. AThe resolution fails because replacement needs 75% of the voting share
  2. BThe resolution is valid as it has at least 66% of the voting share; the CoC must apply to the Adjudicating Authority with Mr. Rao's written consentCorrect
  3. CThe resolution is valid and Mr. Rao takes charge immediately without any application or confirmation
  4. DThe resolution is valid but the IRP automatically continues until the CoC meets again

Explanation

Section 22(2) requires a majority of not less than sixty-six per cent of the voting share of financial creditors, and 70% meets this. Under Section 22(3)(b) the CoC must file an application before the Adjudicating Authority with Mr. Rao's written consent. The 75% threshold was replaced by 66%, so the first option is wrong.

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