Meeting of Creditors explained: this guide covers what it means, who it applies to, the step-by-step process, documents required, fees, due dates and penalties in India — so you can stay compliant with confidence and avoid costly mistakes.
A general meeting of creditors is convened by the resolution professional to consider the repayment plan, or on requisition by creditors holding at least 33% of the value of claims. Quorum is 33% of the voting share, approval of a plan needs more than three-fourths in value of those present and voting, and all other decisions need more than 50%.
Getting to the meeting
Before any meeting of creditors can be held, the claims have to be in and the list has to be made:
- Public notice (Section 102) — issued within 7 days of the Adjudicating Authority's order, in at least one English and one vernacular newspaper circulating in the state where the debtor resides, inviting claims within 21 days.
- Claims (Section 103) — creditors register claims with the professional by electronic communication, courier, or speed post or registered letter.
- List of creditors (Section 104) — prepared within 30 days of the notice from the information in the debtor's application and the proved claims, stating for each creditor the name, amount claimed, amount admitted and security interest.
The list is then made available for inspection by those who submitted claims with proof, served on the debtor, posted on the debtor's website if one exists, presented at the meeting of creditors and filed in certified copy with the Adjudicating Authority along with the repayment plan.
Notice and the accompanying documents
Section 107 requires at least 14 days' notice of the meeting, accompanied by four documents:
- the list of creditors, with amounts claimed, amounts admitted and security interests;
- the repayment plan, with its term, implementation schedule, sources of funds and provision for the professional's fees;
- the statement of affairs, giving the debtor's assets and liabilities; and
- proxy voting forms, including for electronic proxy voting.
Under Regulation 11 the professional convenes the first meeting of creditors in accordance with section 107(1), and for subsequent meetings gives such notice as the creditors decide, which shall not be less than 48 hours.
The statement of affairs (Regulation 10)
Prepared under section 107(3)(b), it covers the current and three preceding financial years: assets and liabilities; assets and debts that are excluded; income statements; copies of income tax returns where available; amounts due to creditors split into secured and unsecured; debts owed to associates over the past three years; guarantees given, including whether any guarantor is an associate; and financial statements of any business owned by the debtor or firm in which the debtor is a partner.
Voting
| Matter | Threshold |
|---|---|
| Approval of the repayment plan | More than three-fourths in value of the voting share present and voting |
| All other matters | More than 50% of the voting share of those who voted |
| Quorum | 33% of the voting share (modifiable by the creditors) |
| Requisition of a meeting | 33% of the value of claims |
Voting share is in proportion to the debt owed to the creditor, expressed as a percentage of total claims. Two classes cannot vote at all: creditors with unliquidated debts, whose claims are not yet capable of valuation, and associates of the debtor, however genuine their claim. Section 109 adds that a creditor not named in the section 104 list is not entitled to vote.
Take total claims of Rs. 5,00,000 from ten creditors, of whom six holding Rs. 3,50,000 attend and are entitled to vote. Three creditors holding Rs. 2,75,000 approve the plan.
That is 55% of total claims but 78.57% of those present and voting — and because the test is three-fourths of the latter, the plan is approved. It remains approved even if two of those three voted by proxy rather than in person.
Secured creditors — Sections 110 and 111
- A secured creditor is entitled to participate and vote in the meeting of creditors.
- Doing so means it forfeits the right to enforce its security during the period of the repayment plan, in accordance with the terms of the plan.
- To avoid that forfeiture the secured creditor must file an affidavit with the professional at the meeting, stating that the vote is exercised only in respect of the unsecured part of the debt and giving the estimated value of that unsecured part.
- Where it votes on that basis, the secured and unsecured parts are treated as separate debts.
This is the sharpest choice a creditor makes in Part III. Voting the whole debt buys influence over the plan at the cost of the security for its duration; the affidavit route keeps the security and reduces the vote to the shortfall.
Conduct of the meeting (Section 108)
Creditors may accept the plan as proposed, propose modifications, or reject it. Modifications must originate with the creditors and every modification requires the debtor's consent — the plan cannot be rewritten over the debtor's head. If it is rejected, the debtor may propose a new plan or the matter moves on to bankruptcy.
Common mistakes
- Measuring the three-fourths majority against total claims instead of those present and voting.
- Letting an associate of the debtor vote because the debt is real.
- Giving 48 hours' notice for the first meeting — that meeting needs 14 days.
- Allowing a secured creditor to vote the full debt and still enforce its security, without the affidavit.