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

Meridian Textiles Ltd, an Indian company, proposes a scheme of arrangement with its unsecured creditors. The Tribunal has ordered a creditors' meeting. At the meeting, the proposal is to be adopted by voting in person, by proxy or by postal ballot. What majority is required for the scheme to be agreed at the meeting under Section 230?

The scheme must be agreed by a majority of persons representing three-fourths in value of the creditors or class of creditors voting in person, by proxy or by postal ballot. Only then, once sanctioned by the Tribunal, does it bind the company and all creditors.

  1. AMajority of persons representing three-fourths in value of the creditors or class votingCorrect
  2. BSimple majority in number of the creditors present
  3. CTwo-thirds in value of the creditors present and voting
  4. DMajority of persons representing nine-tenths in value of the creditors

Explanation

Section 230(6) requires a majority of persons representing three-fourths in value of the creditors or class of creditors (or members or class) voting in person, by proxy or by postal ballot. Two-thirds is the special resolution threshold under other provisions and is not the test here. Nine-tenths in value is relevant only for dispensing with a meeting under sub-section (9).

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