When any person finds himself or herself unable to repay the Debt then they owe to the Financial or Operational Creditors, and then that person who is owing money is deemed to be insolvent.
However from being insolvent to insolvency Resolution is not that easy, there are multiple factors that play a major role and one of the major role is played by the Committee of Creditors.
Section 9 and Company of Creditors
Once there is no positive solution for Section 8 Demand Notice, the Operational financial creditors can file a petition to NCLT to start the process of Insolvency Procedure.
The Committee of Creditors will the decide whether to keep or pursue with that Resolution Professional or not.
The Final approval of the Insolvency Resolution plan is subjective voting percentage from the Committee of Creditors. In Insolvency and Bankruptcy Code the collective decision of the 75% of the committee was taken into account whereas it has now reduced to 66%.
Committee of Creditors: The Definition
Committee of Creditors is a committee consists of a representative of Financial/ Operational creditors to whom Corporate debtors owes a Debt to. The purpose of Committee of Creditors is as follows:-
- Making decisions in the routine tasks associated with corporate Insolvency Resolution Process.
- Approving or rejecting the Insolvency Resolution Plan.
- Deciding upon the liquidation of the Corporate Debtor.
The Creditor of the committee is mostly comprised of Financial creditors rather than operational Creditors.
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