Answer By law4u team
The Committee of Creditors (CoC) is a vital decision-making body in the Corporate Insolvency Resolution Process (CIRP) under the Insolvency and Bankruptcy Code (IBC). It consists exclusively of financial creditors of the corporate debtor and is responsible for approving resolution plans, selecting the Resolution Professional, and overseeing the insolvency proceedings.
Procedure for Constituting the CoC
Appointment of Interim Resolution Professional (IRP)
Once the National Company Law Tribunal (NCLT) admits the insolvency application, it appoints an Interim Resolution Professional (IRP).
Identification and Verification of Financial Creditors
The IRP identifies all financial creditors of the corporate debtor and verifies their claims.
Calling the First Meeting
The IRP calls a meeting of all financial creditors within 30 days of his appointment.
Formation of CoC
At the first meeting, the financial creditors form the Committee of Creditors. Only financial creditors who have verified claims are members.
Determination of Voting Share
Each financial creditor’s voting power is proportional to the amount of their debt in relation to the total debt of all financial creditors.
Eligibility and Members
Only Financial Creditors
Operational creditors and other stakeholders are not members of the CoC.
Financial Creditors Include
Banks, financial institutions, debenture holders, bondholders, homebuyers (in real estate cases), and any other persons to whom financial debt is owed.
Role of the Committee of Creditors
- Approve or reject resolution plans proposed for the corporate debtor.
- Replace or confirm the Resolution Professional.
- Approve key decisions like liquidation, withdrawal of application, or change in the resolution process.
- Hold meetings and take decisions with a minimum 66% (two-thirds) majority vote.
Example
After the NCLT admits a CIRP application against a company, the appointed IRP identifies three banks as financial creditors:
- Bank A with ₹50 crores
- Bank B with ₹30 crores
- Bank C with ₹20 crores
The IRP calls a meeting within 30 days to form the CoC. Voting shares will be:
- Bank A: 50%
- Bank B: 30%
- Bank C: 20%
Together, they decide on a resolution plan requiring at least 66% approval.