The recent introduction of the Guidelines for the Committee of Creditors (CoC) aims to enhance the efficiency, transparency, and effectiveness of the insolvency resolution process under the Insolvency and Bankruptcy Code, 2016 (IBC). These guidelines are designed to ensure that the CoC, predominantly consisting of financial creditors, adheres to best practices in managing and resolving distressed assets.
The guidelines underscore the importance of objectivity and integrity among CoC members. Members are required to follow the provisions of the IBC and associated regulations meticulously, ensuring that their actions and decisions align with the legal framework. This includes maintaining objectivity during decision-making and fostering informed choices by sharing all pertinent information related to the corporate debtor with the CoC and the Insolvency Professional. Such transparency is crucial for making well-informed decisions that maximize the value of the distressed assets.
Independence and impartiality are critical elements of these guidelines. Members must disclose any conflicts of interest arising from personal, pecuniary, or professional relationships with stakeholders as soon as they become aware of them. This disclosure helps maintain the credibility and fairness of the decision-making process. Additionally, CoC members are expected to stay informed about the latest provisions of the IBC and actively participate in meetings with adequate representation and authorization.
The guidelines also address the need for effective cooperation and supervision. CoC members should supervise the Insolvency Professional’s performance and facilitate the prompt appointment of required professionals, adhering to the timelines stipulated by the IBC. Efforts should be made to resolve disputes between members through dialogue rather than litigation, promoting a cooperative environment conducive to timely resolution.
Confidentiality is emphasized as a fundamental responsibility of CoC members. They must uphold confidentiality agreements rigorously to protect sensitive information. Furthermore, members are tasked with ensuring that insolvency resolution costs are reasonable and making timely decisions regarding expenses and fees associated with the insolvency process. This includes setting appropriate fees for the liquidator if liquidation becomes necessary.
Regular monitoring of the Insolvency Professional’s activities is also mandated. CoC members are required to review and decide on the inclusion of belated claims, participate in valuation presentations, and ensure that meetings are conducted at specified intervals. Sharing up-to-date financial information and insights with the Insolvency Professional is crucial for the effective management of the corporate debtor’s assets.
Lastly, the guidelines emphasize the assessment of resolution plans. CoC members should thoroughly review the information memorandum, contribute to marketing strategies, and ensure that all resolution plans are presented to the CoC. They should also consider the establishment of a monitoring committee if needed, to oversee the implementation of the resolution plan.
In summary, the Guidelines for the Committee of Creditors aim to streamline the insolvency resolution process by promoting rigorous standards of conduct, transparency, and cooperation among CoC members. These measures are designed to enhance the efficacy of the insolvency resolution process, ultimately contributing to the maximization of value for distressed assets under the IBC. These guidelines are called the Guidelines for Committee of Creditors and have been w.e.f. 6 August 2024.
Subscribers can access the Case, including Case Analysis, Ratio Decidendi, Headnotes, Briefs, Case Research, Cited Case Laws, Case Law Cross-references, and the latest updates on Statutes, Notifications, Circulars, Guidelines and more.
Click on the Citation/Link to access these resources
Comments