POINT

EXPLANATION

1. Power of Tribunal to call for a meeting on an application filed for a compromise or arrangement [Sub-section 1)]:

Where a compromise or arrangement is proposed between—
(a) a company and its creditors or any class of them; or

(b) a company and its members or any class of them,
 

the Tribunal may, on the application of the-

• Company, or
• Creditor, or
• Member of the Company, or
• Liquidator

order a meeting of the creditors or class of creditors, or of the members or class of members, as the case may be, to be called, held and conducted in such manner as the Tribunal directs.

2. Disclosures by person who makes an application for compromise or arrangement [Sub-section (2)]:
 

The Company or any other person, by whom an application is made, shall disclose to the Tribunal by affidavit—

(a) all material facts relating to the company, such as the latest financial position of the company, the latest auditor's report on the accounts of the company and the pendency of any investigation or proceedings against the company;

(b) reduction of share capital of the company, if any, included in the compromise or arrangement;

(c) any scheme of corporate debt restructuring consented to by not less than seventy-five percent of the secured creditors in value, including—

(i) a creditor’s responsibility statement in the prescribed form;
(ii) safeguards for the protection of other secured and unsecured creditors;
(iii) report by the auditor that the fund requirements of the company after the corporate debt restructuring as approved shall conform to the liquidity test based upon the estimates provided to them by the Board;
(iv) where the company proposes to adopt the corporate debt restructuring
guidelines specified by the Reserve Bank of India, a statement to that effect; and
(v) a valuation report in respect of the shares and the property and all assets, tangible and intangible, movable and immovable, of the company by a registered valuer.
 

3. Notice of meeting to be conducted on order of Tribunal [Sub-section (3)]:
 

Where a meeting is proposed to be called in pursuance of an order of the Tribunal, a notice of such meeting shall be sent to:

• All the creditors or class of creditors,
• All the members or class of members; and
• The debenture holders of the company,

individually at the address registered with the company.

Note: As per Section 230 (5), the notice of the meeting shall also be sent to the sectoral regulators and the authorities which are likely to be affected by the compromise or arrangement.
 

4. Vote to the adoption of the compromise or arrangement [Sub-section (4)]:

A notice shall provide that the persons to whom the notice is sent may vote in the meeting either themselves or through proxies or by postal ballot to the adoption of the compromise or arrangement within one month from the date of receipt of such notice:

Provided that any objection to the compromise or arrangement shall be made only by persons holding not less than ten per cent of the shareholding or having outstanding debt amounting
to not less than five per cent of the total outstanding debt as per the latest audited financial statement.
statement.
 

5. Notices to sectoral regulators to make representation, if likely to be affected by the compromise or arrangement [Sub-section (5)]:

A notice along with all the documents in such form as may be prescribed shall also be sent to-

• the Central Government,
• the income-tax authorities,
• the Reserve Bank of India,
•  the Securities and Exchange Board,
•  the Registrar,
•  the respective stock exchanges,
•  the Official Liquidator,
• the Competition Commission of India established under the Competition Act, 2002, if necessary,
• and such other sectoral regulators or authorities which are likely to be affected by the compromise or arrangement and

shall require that representations, if any, to be made by them shall be made within a period of thirty days from the date of receipt of such notice, failing which, it shall be presumed that
they have no representations to make on the proposals.

6. Binding order of Tribunal [Sub-section (6)]:

Where, at a meeting held, majority of persons representing three-fourths in value of the creditors, or class of creditors or members or class of members, as the case may be, voting
in person or by proxy or by postal ballot, agree to any compromise or arrangement and if such compromise or arrangement is sanctioned by the Tribunal by an order, the same shall be binding on the company, all the creditors, or class of creditors or members or class of members, as the case may be, or, in case of a company being wound up, on the
liquidator, "appointed under the Companies Act, 2013 or under the Insolvency and Bankruptcy Code, 2016, as the case may be,” and the contributories of the company.
 

7. Particulars to be stated in the order [Sub-section (7)]:

An order made by the Tribunal, shall provide for all or any of the following matters, namely:—

(a) where the compromise or arrangement provides for conversion of preference shares into equity shares, such preference shareholders shall be given an option to either obtain arrears of dividend in cash or accept equity shares equal to the value of the dividend payable;

(b) the protection of any class of creditors;

(c) if the compromise or arrangement results in the variation of the shareholders’ rights, it shall be given effect to under the provisions of section 48;

(d) if the compromise or arrangement is agreed to by the creditors under sub-section (6), any proceedings pending before the Board for Industrial and Financial Reconstruction (BIFR) established under section 4 of the Sick Industrial Companies (Special Provisions) Act, 1985 shall abate;

(e) such other matters including exit offer to dissenting shareholders, if any, as are in the opinion of the Tribunal necessary to effectively implement the terms of the compromise or arrangement:

Provided that no compromise or arrangement shall be sanctioned by the Tribunal unless a certificate by the company's auditor has been filed with the Tribunal to the effect that the accounting treatment, if any, proposed in the scheme of compromise or arrangement is in conformity with the accounting standards prescribed under section 133.
 

8. Filing of order of tribunal with registrar [Sub-section (8)]:

The order of the Tribunal shall be filed with the Registrar by the company within a period of thirty days of the receipt of the order.

9. The Tribunal may dispense with calling of a meeting of creditor

The Tribunal may dispense with calling of a meeting of creditor or class of creditors where such creditors or class of creditors, having at least ninety per cent value, agree and confirm, by way of affidavit, to the scheme of compromise or arrangement. [Sub-section (9)].

10. Compromise in relation to buy-back of securities [sub-section (10)]:

No compromise or arrangement in respect of any buy-back of securities under this section shall be sanctioned by the Tribunal unless such buy-back is in accordance with the provisions of section 68.

11. Inclusion of takeover offer [Sub-section (11)]:

Any compromise or arrangement may include takeover offer made in such manner as may be prescribed.

Provided that in case of listed companies, takeover offer shall be as per the regulations framed by the Securities and Exchange Board of India (SEBI).
 

12. Application to Tribunal by aggrieved party [Sub-section (12)]:

An aggrieved party may make an application to the Tribunal in the event of any grievances with respect to the takeover offer of companies other than listed companies in such manner as may be prescribed and the Tribunal may, on application, pass such order as it may deem fit.