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

Under a pre-packaged process, the CoC of Narmada Foods Ltd is considering a base resolution plan that impairs some claims owed by the corporate debtor. The plan has no provision for promoters to dilute their shareholding. What must the CoC do before approving it?

The CoC must record reasons for approving the plan. Section 54K(14) allows it to require promoter dilution where claims are impaired, and if the plan has no dilution, its proviso obliges the CoC to record reasons before approval.

  1. AObtain consent of the promoters in writing
  2. BRecord reasons for its approvalCorrect
  3. CRefer the plan to the Board for prior clearance
  4. DSeek a fresh valuation from two registered valuers

Explanation

Under Section 54K(14), where claims are impaired the CoC may require promoters to dilute shareholding, voting or control rights. The proviso says that if the plan does not provide for such dilution, the CoC must record reasons for its approval before approving it. No promoter consent, Board clearance or fresh valuation is mentioned there.

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