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CS Executive · Setting Up of Business, Industrial and Labour Laws · Limited Liability Partnership

Zenith Traders LLP proposes a compromise with its creditors. Who may apply to the Tribunal to order a meeting of creditors, and what majority at that meeting makes the compromise binding once sanctioned?

The LLP, any creditor or any partner can apply to the Tribunal. If a majority representing three-fourths in value of the creditors at the meeting agrees, the compromise, once sanctioned by the Tribunal, binds all creditors and the LLP.

  1. AOnly the LLP; a simple majority in number of creditors
  2. BThe LLP, any creditor or any partner; a majority representing three-fourths in value of the creditorsCorrect
  3. COnly the Registrar; two-thirds in value of the creditors
  4. DOnly a creditor; unanimous consent of all creditors

Explanation

Under Section 60 the Tribunal may act on the application of the LLP, any creditor or any partner (or the liquidator if the LLP is being wound up). A majority representing three-fourths in value at the meeting, followed by Tribunal sanction, binds all creditors. The option naming a simple majority in number uses the wrong test, since the law requires value.

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