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

Under a resolution plan for Ganga Polymers Ltd, payments to creditors are to be made in two stages. Dissenting financial creditors, who had voting rights but did not vote in favour of the plan, are offered payment only after assenting financial creditors are paid in each stage. Per Regulation 38(1) proviso, what is the correct position?

Dissenting financial creditors must be paid at least pro rata and in priority over assenting financial creditors in each stage. Regulation 38(1) proviso applies this where payment is in stages, so a plan paying dissenters after assenters is non-compliant.

  1. ADissenting financial creditors must be paid at least pro rata and in priority over assenting financial creditors in each stageCorrect
  2. BDissenting financial creditors may be paid after assenting financial creditors if the plan so states
  3. CDissenting and assenting financial creditors must be paid equally in each stage
  4. DDissenting financial creditors must be paid only in the final stage

Explanation

Where the plan provides payment in stages, the proviso requires that dissenting financial creditors be paid at least pro rata and in priority over assenting financial creditors in each stage. The plan's ordering is therefore non-compliant.

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