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CS Professional · Corporate Restructuring, Valuation and Insolvency · Types of Corporate Restructuring

Meghdoot Textiles Ltd proposes a scheme of arrangement with its unsecured creditors. The Tribunal has ordered a creditors' meeting. At the meeting, creditors voting in person, by proxy or by postal ballot approve the scheme. What level of approval under Section 230 makes the scheme eligible for sanction and binding on all creditors in that class?

The scheme needs approval by a majority of persons representing three-fourths in value of the creditors, or class, voting in person, by proxy or by postal ballot. After Tribunal sanction it binds the company and all creditors of that class.

  1. AA simple majority in number of creditors present
  2. BA majority of persons representing three-fourths in value of the creditors votingCorrect
  3. CTwo-thirds in value of all creditors, whether voting or not
  4. DUnanimous consent of all creditors in the class

Explanation

Section 230(6) requires a majority of persons representing three-fourths in value of the creditors or class voting in person, by proxy or by postal ballot. Once sanctioned by the Tribunal, the scheme binds all in the class. A simple majority in number or a two-thirds threshold is not what the section states.

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