Summary: A Resolution Professional (RP) for a company received a request from a Committee of Creditors (CoC) member, who holds a 30% voting share, to convene an urgent meeting to discuss interim finance. The RP, citing urgency, issued a meeting notice the next morning. However, other CoC members challenged the validity of the RP’s actions, arguing that the request came from a member with less than the required 33% voting rights and that the notice period was insufficient. Based on the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2022, the RP’s actions are not valid. Regulation 18 states that an RP is only required to convene a meeting if requested by members with at least 33% of the voting rights. The member who made the request had only a 30% share, so the RP was not obligated to call the meeting. Furthermore, Regulation 19 mandates a minimum of five days’ notice for a meeting, which can be reduced to no less than 24 hours only if the committee agrees. The RP gave a notice of less than 24 hours, and since the committee had not approved a reduction in the notice period, this action was also a violation of the regulations.
IBC, 2016: Validity of RP’s Actions in CoC Meeting
QUERY: The Resolution Professional (RP) of a company receives a request from a member of the Committee of Creditors (CoC) (holding 30% share in the CoC) on 1 st July, 2022 at 5.30 PM to convene a meeting on an urgent basis to discuss the matter relating to raising interim finance. Considering the urgency and citing the reason that a request has come to convene a meeting, the RP circulates the notice of the meeting on 2nd July, 2022 in the morning itself at 11 AM. During the meeting, other members of the CoC have informed the RP that his action of convening the meeting based on the request received and the duration of notice is not sufficient as per the provisions of the Insolvency and Bankruptcy Code, 2016. Discuss the validity of the action taken by the RP.
| APPLICABLE PROVISIONS: Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2022
REGULATION 18 MEETINGS OF THE COMMITTEE. A resolution professional may convene a meeting of the committee as and when he considers necessary, and shall convene a meeting if a request to that effect is made by members of the committee representing thirty-three(33%) per cent of the voting rights. REGULATION 19. NOTICE FOR MEETINGS OF THE COMMITTEE. (1) Subject to this Regulation, a meeting of the committee shall be called by giving not less than five days’ notice in writing to every participant, at the address it has provided to the resolution professional and such notice may be sent by hand delivery, or by post but in any event, be served on every participant by electronic means in accordance with Regulation 20. (2) The committee may reduce the notice period from seven days to such other period of not less than twenty-four hours, as it deems fit. REGULATION 20- SERVICE OF NOTICE BY ELECTRONIC MEANS. (1) A notice by electronic means may be sent to the participants through e-mail as a text or as an attachment to e-mail or as a notification providing electronic link or Uniform Resource Locator for accessing such notice. (2) The subject line in e-mail shall state the name of the corporate debtor, the place, if any, the time and the date on which the meeting is scheduled. (3) If notice is sent in the form of a non-editable attachment to an e-mail, such attachment shall be in the Portable Document Format or in a non-editable format together with a ‘link or instructions’ for recipient for downloading relevant version of the software. (4) When notice or notifications of availability of notice are sent by an e-mail, the resolution professional shall ensure that it uses a system which produces confirmation of the total number of recipients e-mailed and a record of each recipient to whom the notice has been sent and copy of such record and any notices of any failed transmissions and subsequent re-sending shall be retained as ‘‘proof of sending’’ (5) The obligation of the resolution professional shall be satisfied when he transmits the e-mail and he shall not be held responsible for a failure in transmission beyond its control. (6) The notice made available on the electronic link or Uniform Resource Locator shall be readable, and the recipient should be able to obtain and retain copies and the resolution professional shall give the complete Uniform Resource Locator or address of the website and full details of how to access the document or information. (7) If a participant, other than a member of the committee, fails to provide or update the relevant e-mail address to the resolution professional, the non-receipt of such notice by such participant of any meeting shall not invalidate the decisions taken at such meeting. |
REPLY:
As per Regulation 18 of the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2022, a Resolution Professional (RP) may convene a meeting if he considers it necessary, on a request received from members of the committee and shall convene a meeting if the same is made by members of the committee representing at least 33% per cent of the voting rights.
A resolution professional may place a proposal received from members of the committee in a meeting, if he considers it necessary and shall place the proposal if the same is made by members of the committee representing at least 33% of the voting rights.
Further, a meeting of the committee shall be called by giving not less than five days’ notice in writing to every participant, at the address it has provided to the resolution professional and such notice may be sent by hand delivery, or by post but in any event, be served on every participant by electronic means.
The committee may reduce the notice period from five days to such other period of not less than twenty-four hours, as it deems fit, however, if there is any authorised representative, the committee may reduce the period to not less than forty-eight hours.
Considering the above provisions, the RP has violated the provisions of the Code since he has called the meeting based on the request received from the CoC members holding less than 33% voting rights and the notice for the meeting is also less than 24 hours.
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