Meeting of the Creditors


In the event that the RP requires that an MoC be constituted and held, the RP is required to send a notice to all the creditors along with a copy of the Plan. The creditors may at the MoC approve, reject or modify the Plan and their voting share shall be in proportion to the debt owed to them.

The most significant deviation from the CIRP of a Corporate Debtor in terms of the Code is that in the event at the MoC, the creditors require that the Plan be modified, in order to absolute such modification the consent of the Guarantor is required to be taken. This is a significant deviation and asset in the hands of the Guarantor, as no modification of the Plan would be effective, without his sole approval, thus in effect guaranteeing the Guarantor the right to veto any modification of the Plan.

In terms of Section 110 of the Code, any secured creditor of the Guarantor is entitled to participate and vote at the MoC, however, such secured creditor is required to forfeit his right to enforce his security during the period of the Plan and in accordance with the Plan. This view is in tandem with the general principal that secured creditors are generally not represented on a committee or meeting of creditors if they are fully secured or over-secured. This is so, because, their interests are significantly different from those of unsecured creditors and their ability to participate in and potentially alter the outcome of decisions by creditors may not be in the best interests of all creditors.

Recognizing this divergence of interests, insolvency laws of some countries require secured creditors to surrender their security interest before they can participate in the proceedings and vote on any matter. Where they are under-secured, however, their interests are more likely to align with those of unsecured creditors and their participation in the committee or in voting by creditors may be appropriate, at least to the extent that they are under-secured. The Code seems to recognise this, given the intent to keep secured creditors separate from the proceedings of the MoC. Given this, the legislative intent in relation to secured creditors of a Guarantor undergoing the insolvency process is in stark contrast to the process of a Corporate Debtor undergoing CIRP, where the committee of creditors is formed solely of financial creditors, regardless of whether or not such creditors may be secured.

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