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

Under a draft resolution plan for Ganga Foods Ltd, existing equity shares are to be cancelled and new securities issued to the creditors in exchange for their claims. Which statement matches Regulation 37 of the CIRP Regulations?

Both steps are permitted. Regulation 37 lists cancellation or delisting of the corporate debtor's shares, if applicable, and issuance of securities for cash, property, securities or in exchange for claims or interests. So converting creditors' claims into new securities after cancelling equity is a recognised resolution measure.

  1. ANeither measure is allowed, because the corporate debtor's share capital cannot be altered in CIRP
  2. BCancellation or delisting of shares, if applicable, and issuance of securities in exchange for claims or interests are both listed as plan measuresCorrect
  3. COnly issuance of securities for cash is allowed, not in exchange for claims
  4. DCancellation of shares is allowed, but issuance of securities needs liquidation first

Explanation

Regulation 37 lists cancellation or delisting of any shares of the corporate debtor, if applicable, and issuance of securities for cash, property, securities, or in exchange for claims or interests. Both proposed steps are therefore within the listed measures. Limiting issuance to cash contradicts the text.

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