All resolution plans under IBC to be put to vote simultaneously

The Insolvency and Bankruptcy Board of India (IBBI) has amended the regulations making it mandatory for the Committee of Creditors (CoC) of insolvent companies to put all compliant resolution plans to vote simultaneously after evaluation as per the evaluation matrix.

IBBI has notified the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) (Fourth Amendment) Regulations, 2020. The regulations provide that the CoC shall evaluate all compliant resolution plans as per evaluation matrix to identify the best of them and may approve it.

“The amendment made to the regulations today provides that after evaluation of all compliant resolution plans as per evaluation matrix, the Committee of Creditors shall vote on all compliant resolution plans simultaneously,” an IBBI statement said.

The resolution plan, which receives the highest votes, but not less than 66 per cent of voting share, shall be considered as approved. As per the amendment, where only one resolution plan is put to vote, it shall be considered approved if it receives requisite votes.

In cases where two or more resolution plans are put to vote simultaneously, the resolution plan, which receives the highest votes, but not less than requisite votes, shall be considered as approved. If two or more resolution plans receive equal votes, but not less than requisite votes, the committee shall approve any one of them, as per the tie-breaker formula announced before voting.

Further, if none of the resolution plans receives requisite votes, the committee shall again vote on the resolution plan that received the highest votes, subject to the timelines under the Insolvency and Bankruptcy Code.

Veena Sivaramakrishnan, Partner, Shardul Amarchand Mangaldas & Co said that the tie breaker formula could soon be the most important factor in a resolution plan getting selected.

“Like liquidation value, the treatment of this formula would also be the subject to significant scrutiny. A detailed process of parallel voting ought to meet the intended result of value maximisation for the creditors and stakeholders,” she said.

Rajiv Chandak, Partner with Deloitte India said, “With latest amendment, all compliant plans will be put up for vote and lenders will have an option to vote for multiple plans.”

The amendment also provides that the three insolvency professionals offered by the interim resolution professional must be from the state or Union Territory, which has the highest number of creditors in the class as per records of the corporate debtor. This will facilitate ease of coordination and communication between the authorised representative (AR) and the creditors in the class he represents.

IBC envisages appointment of an authorised representative (AR) by the adjudicating authority to represent financial creditors in a class, like allottees under a real estate project, in the committee of creditors.

The regulations require the interim resolution professional to offer a choice of three insolvency professionals (IP) in the public announcement, and the creditors in a class to choose one of them to act as their authorised representative.

In another change, post the amendment the authorised representative shall seek voting instructions only after circulation of minutes of meeting and vote accordingly. He shall, however, circulate the agenda, and may seek preliminary views of creditors in the class before the meeting, to enable him to effectively participate in the meeting.