Stakeholders seek clarity on bankruptcy board's 'single voting' plan

economictimes.indiatimes.com:

stakeholders, including asset reconstruction companies and legal firms, have raised concerns over a proposal by the Insolvency and Bankruptcy Board of India (IBBI) on «single transferable voting system» (STV) for approving resolution plans, as the proposed plan seemingly does not consider relative security structures and seniority and lacks clarity on the weightage given to the debt share of financial creditors. IBBI had published a discussion paper on measures for increasing the possibility of resolution and proposed that financial creditors will be required to vote for all the plans while mentioning grading of the resolution plan on June 7, 2023.

While the paper aims to address the challenges faced in the resolution process under the Insolvency and Bankruptcy Code (IBC), the industry experts have raised doubts over the clarity of the proposal. «There is a lack of clarity surrounding the weightage given to the debt share of financial creditors in the single transferable going system,» an executive at an ARC said, on the condition of anonymity.

Stakeholders have expressed concerns over the definition provided for single transferable vote as it may lead to faulty interpretations, as preference takes precedence over the debt percentage. «This suggests each creditor would have only one single vote, irrespective of their lending exposure to the corporate debtor, contradicting the prescribed formula for calculating the voting share in the CoC under the IBC,» another ARC executive said.

Now, RPs present resolution plans to the committee of creditors (CoC) for voting. The CoC can approve a plan if it gets at least 66% of the voting share.

Under the proposed system, all plans will be evaluated based on their first preference. If