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RESOLUTION PLANNING
The Insolvency and Bankruptcy Code (IBC), 2016, establishes a structured framework for resolution plans to revive distressed companies while balancing creditor rights. Below is a detailed breakdown of mandatory and optional components of resolution plans under the IBC, based on statutory provisions and judicial interpretations.
**Mandatory Requirements**
**1. Eligibility Compliance (Section 29A)**
- Resolution applicants must submit an affidavit confirming they are not disqualified under Section 29A (e.g., wilful defaulters, undischarged insolvents, or entities linked to fraudulent transactions)[1][4].
**2. Payment Priorities**
- CIRP Costs: Must be paid in full, in priority to other debts[1][6].
- Operational Creditors: Payment must not be less than their entitlement in liquidation (Section 53 hierarchy)[1][5].
- Dissenting Financial Creditors: Must receive at least their liquidation value before assenting creditors[5].
**3. Content Requirements (Regulation 38, IBBI Regulations)**
- Implementation Schedule: Clear timeline for plan execution[2][5].
- Management Plan: Details on post-approval control of the corporate debtor[1][5].
- Feasibility and Viability: Must address the cause of default and demonstrate operational/financial sustainability[2][3][6].
- Approvals: Specify regulatory/governmental approvals required and timelines[2][5].
**4. Legal Compliance**
- The plan must not contravene any laws (e.g., Companies Act, SEBI regulations)[1][6].
**5. Disclosure of Past Failures**
- Resolution applicants must declare if they or related parties have previously failed to implement approved plans[5].
**Optional Components**
**1. Restructuring Mechanisms**
- While not mandatory, plans often include mergers, demergers, or asset sales to improve viability[6].
**2. Stakeholder-Specific Terms**
- Additional benefits for operational creditors or employees beyond statutory minima (e.g., equity stakes, staggered payments)[6].
**3. Financial Arrangements**
- Optional use of instruments like convertible debt or earn-outs to structure payouts[6].
**4. Contingency Provisions**
- Mitigation strategies for risks like approval delays or market downturns (not required but often included)[2].
**5. Post-Implementation Governance**
- Detailed ESG commitments or board composition plans (beyond basic management details)[6].
**Approval Process**
- Committee of Creditors (CoC) Evaluation: Plans are assessed using an evaluation matrix focusing on feasibility, viability, and value maximization[6].
- Voting Threshold: Requires approval by 66% of financial creditors (by voting share)[6].
- RP’s Role: The Resolution Professional verifies compliance with Section 30(2) before presenting plans to the CoC[1][4].
**Consequences of Non-Compliance**
- Rejection by CoC: Plans failing mandatory criteria are excluded from voting[4].
- Judicial Intervention: Courts may annul plans violating Section 30(2) or public policy (e.g., Essar Steel case)[6].
**Conclusion**
The IBC prioritizes mandatory requirements to protect creditor interests and ensure revival feasibility, while allowing flexibility for innovation in optional terms. This balance has transformed India’s distressed asset market, with resolution plans recovering ₹3.16 lakh crore for creditors as of March 2025. As the ecosystem evolves, optional components like ESG-linked payouts are gaining prominence, reflecting broader economic priorities.