Committee of Creditors
Also called: CoC · Topic: Banking Regulation, NPAs and Financial Stability · NCERT: Beyond NCERT
Meaning
The Committee of Creditors (CoC) is the group of financial creditors that decides the fate of a company in the IBC's Corporate Insolvency Resolution Process (CIRP). Financial creditors are those who lent money, such as banks and bondholders. The CoC considers resolution plans, which are offers to take over or rescue the company. A plan is approved with 66% of the vote by value, meaning votes are weighted by the size of each creditor's loan. If no plan is approved in time, the company goes into liquidation. The CoC is the reason the IBC is called "creditor in control".
Example
In Essar Steel (Supreme Court, 2019), the Court upheld the CoC's "commercial wisdom". Courts should not rewrite the business terms of a plan the CoC has approved.
Don't confuse with
- Resolution professional: the RP runs the company and the process day to day. The CoC takes the key decisions, such as approving the plan.
- Operational creditors: these are suppliers, workers and government bodies owed dues. They do not vote in the CoC.
Related concepts
- Insolvency
- Bankruptcy
- Corporate Insolvency Resolution Process
- Resolution professional
- Liquidation waterfall
- Haircut
- Pre-packaged insolvency
- Financial and operational creditors
- Cross-border insolvency