Answer By law4u team
The Committee of Creditors (CoC) is the principal decision-making authority during the Corporate Insolvency Resolution Process (CIRP) under the Insolvency and Bankruptcy Code (IBC). The CoC exercises substantial control over the fate of the insolvent corporate debtor, including approving resolution plans or deciding liquidation, ensuring that the interests of financial creditors are safeguarded.
Powers of the Committee of Creditors
Approval of Resolution Plans
The CoC reviews and approves or rejects resolution plans submitted by prospective resolution applicants. Approval requires at least a 66% majority of voting share.
Appointment and Replacement of Resolution Professional (RP)
The CoC appoints the Resolution Professional after the interim period and has the authority to replace the RP if needed.
Deciding on Liquidation
If no viable resolution plan is approved within the stipulated time, the CoC can decide to initiate liquidation proceedings.
Extension of CIRP Timeline
The CoC may approve an extension of the CIRP beyond the initial 180 days (plus a 90-day extension) if necessary.
Approving Withdrawal of CIRP Application
Subject to NCLT approval, the CoC can approve withdrawal of the insolvency application if a settlement is reached.
Financial Decisions Related to the Corporate Debtor
The CoC authorizes significant financial decisions like selling assets, restructuring debts, or investments during the resolution process.
Overseeing Resolution Professional’s Actions
The CoC monitors and directs the RP’s activities to ensure transparency and efficiency in the process.
Delegation of Powers
The CoC may delegate specific powers to the RP or sub-committees as necessary.
Significance of CoC Powers
- Empowers financial creditors to safeguard their investments.
- Ensures collective decision-making based on the majority interest.
- Balances interests between creditors and the debtor during insolvency.
- Helps avoid arbitrary or unilateral decisions by any single creditor or management.
Example
During CIRP, a resolution applicant submits a plan proposing to revive the company by infusing new capital. The CoC, with 70% voting share, evaluates the plan and approves it. The CoC also replaces the initially appointed RP with another insolvency professional due to better expertise.
