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

Meera Textiles Ltd proposes an insolvency professional as resolution professional for its PIRP. Its unrelated financial creditors must approve this proposal. What minimum approval is required?

Approval is needed from unrelated financial creditors representing not less than sixty-six per cent in value of the financial debt due to such creditors. Related-party creditors are excluded from this vote, and neither a simple majority nor unanimity is the statutory requirement.

  1. ANot less than 51% in value of financial debt due to unrelated financial creditors
  2. BNot less than 75% in value of financial debt due to all financial creditors, including related parties
  3. CNot less than 66% in value of financial debt due to unrelated financial creditorsCorrect
  4. DUnanimous approval of unrelated financial creditors

Explanation

Under section 54A(2)(e), financial creditors who are not related parties and represent not less than 66% in value of the financial debt due to such creditors must approve the proposed professional. Related parties are excluded, which rules out the option counting them. 51% and unanimity are not the prescribed thresholds.

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