MUMBAI: Amid the euphoria over Bankruptcy Code and hopes of turning around debt-ridden companies, many lenders have overlooked a simple, yet crucial, caveat.
Almost all significant decisions such as offering preference shares to infuse funds into a defaulting company, selling properties and assets, floating convertibles, and declassifying the promoter following a dilution of shareholding – have to be approved by shareholders of the company in question; and some key decisions have to be cleared by a special resolution, requiring the support of 75% shareholders.
Since existing promoters, who resist giving up control, are also significant stakeholders in such companies, they could oppose key resolutions to frustrate lenders. A few week…
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