CoCs must be fair in rescuing businesses: IBBI
NEW DELHI : Creditors’ committee that decides the fate of companies that find themselves in bankruptcy courts must be fair and transparent in their decisions, said the Insolvency and Bankruptcy Board of India (IBBI).
The bankruptcy decision-maker said how to save a business is as important as the rescue itself. The bailout must ensure optimal use of the economy’s limited resources, promote the availability of credit and entrepreneurship, he said.
“The conduct of the Creditors’ Committee (CoC) and its members must be flawless, to justify their exalted position in the (c,” the IBBI said in a communication posted on its website. The regulator is hosting a workshop on the (c) role of the creditors committee as an institution of public faith on Monday as part of its advocacy efforts to further strengthen the institution.
The IBBI’s emphasis on transparent and fair creditors committee decision-making comes after a standing parliamentary committee in August pointed out the steep haircuts taken by lenders in some cases and called for a code of creditors. conduct for these panels.
âResponsibility comes with accountability. Since the decisions of the CoC have an impact on the life of the company and therefore on its stakeholders, it must be fair and transparent in its decisions, âsaid IBBI.
The regulator explained that it is normal for a company to be stressed in a market economy. Such stress, however, must be dealt with quickly and in an orderly fashion. The Insolvency and Bankruptcy Code recognizes that a limited liability company is a contract between equity and debt, the regulator said.
âAs long as the debt is repaid, equity, represented by a board of directors, has full control of the business. When the business fails to service its debt, control of the business passes to the creditors, represented by a creditors’ committee (CoC), to resolve the stress, âhe said.
The CoC has powers commensurate with its responsibilities and can decide on a discount of any magnitude to one or all of the stakeholders necessary to rescue the company and seek and choose the best resolution plan on the market, unlike other avenues that allow creditors to find resolution only from existing developers, the regulator said.
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