The government is debating whether to lower the approval threshold for resolution plans under the Insolvency and Bankruptcy Code (IBC) in a move aimed at preventing too many insolvent companies from going into liquidation.
More than 75% of creditors currently have to agree to a resolution plan, implying that just over 26% can reject it and force a company into liquidation.
The government feels liquidation should be the last resort and is considering whether such plans can be approved by a two-thirds majority or even a simple majority.
“There is a need to relook at the current majority requirement. Just 26% members cannot take a company to liquidation,” said a senior government official, who didn’t want to be named. “We…