The government on Wednesday said insolvency resolution plans, such as sale and transfer of assets, do not require approval from shareholders or the company as the law provides a detailed process from the receipt of the resolution plan to approval by the adjudicating authority.
The government is of the view that Insolvency and Bankruptcy Code (IBC) provides that the resolution plan will be binding on a company, its shareholders, lenders, employees, guarantors and other stakeholders if approved by NCLT. But it has suggested that the onus of ensuring that the plan is in line with norms is with the committee of lenders and the insolvency resolution professional.
“It is understood that the requirements… of the Code (IBC) ensure that resolution plan(s) considered and approved by the committee of creditors and the adjudicating authority is compliant with the provisions of the applicable laws and therefore is legally implementable,” the ministry said. It pointed out that a resolution plan should not allow for 100% foreign investment when the FDI ceiling for the sector is 75%. “The purpose is to prevent approval to resolution plans, which are not legally implementable,” it added.
