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CoC is not proactive enough
News:
- The Chairman of Insolvency and Bankruptcy Board (IBB) of India has observed that the Committee of Creditors (CoC) has not been efficient in implementing the provisions of Insolvency and Bankruptcy Code.
Important Facts
- The Committee of Creditors comprises of both financial and operational creditors.
- The main function of Committee of Creditors (CoC) to create a resolution plan within the stipulated time frame, in order to revive the corporate debtor.
- For this purpose, IBC provides that such a plan must have the approval of at least 75% of the creditors. Failure to approve resolution plans leads to initiation of liquidation proceedings.
- FICCI president discussed the consequences of 75% approval clause. According to him, a lot of good plans get rejected because small creditors could hold up the whole process.
- The unintended consequence was that a lot of good plans were getting rejected because small creditors could hold up the whole process.
- He suggested that the threshold of rejection of a plan should be much lower- about 51%
