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CS Professional · Corporate Restructuring, Valuation and Insolvency · Preparation and Approval of Resolution Plan

Under a pre-packaged process, Meghdoot Pharma Ltd's base resolution plan pays only 70 per cent of the confirmed claims of its operational creditors. What must the resolution professional do next?

The resolution professional must invite prospective resolution applicants to submit competing plans. A base plan that does not fully pay confirmed operational creditor claims impairs them, so the committee cannot approve it directly under the pre-packaged provisions.

  1. ASubmit the plan to the Adjudicating Authority after a sixty-six per cent vote
  2. BInvite prospective resolution applicants to submit plans that compete with the base resolution planCorrect
  3. CApply immediately for liquidation of the corporate debtor
  4. DAsk operational creditors to vote on the plan as a separate class

Explanation

Under Section 54K(4) the committee may approve the base plan only if it does not impair operational creditors' claims. Section 54K(5)(b) says that where the plan impairs such claims, the resolution professional shall invite prospective resolution applicants to compete. Paying 70 per cent is impairment under Explanation II, since full payment is not provided.

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