Committee of Creditors: Functioning, Composition and Significance

Committee of Creditors: Functioning, Composition and Significance

April 30, 2022 Admin
creditors of committee of creditors committee of creditors

Committee of creditors is formed under regulation 21 of the code, and a major decision-maker in the corporate insolvency resolution process. Let’s find out more in detail. 


To make the Corporate Insolvency Resolution Process effective, based on the guidance and suggestions of the members of the committee of creditors, the resolution plan is prepared for the company. As per this code, a company that is registered under the Companies Act 1956, such as Limited liability partnership, Partnership firms, and Individuals or under the Insolvency and Bankruptcy Code, any financial or operational creditor can start the process of corporate insolvency against the corporate debtor. This can be initiated only when the corporate debtor is a defaulter in repayment of debts.


Definition: Committee of creditors

In the process of insolvency, the committee of creditors holds an influential position. This committee of creditors is considered to be a higher level decision-making body in initiating and governing the Corporate Insolvency Resolution Process. According to regulation 21 of the code, a committee of creditors is formulated to fulfill the responsibility of the interim resolution professional so as to call for claims from all the creditors. The maximum time duration should be 14 days from the public announcement and once the claim gets verified, the committee of creditors is formed. 


The mandatory condition of the code is to have all financial creditors in the committee of creditors. As per the regulations of the code, it also lists the financial creditors and operational creditors separately. A financial creditor is the one to whom the financial debt and the interest is due, for example Home-buyers, banks, bond holders, guarantee providers, etc. On the other hand, an operational creditor is a person who owns debts related to the goods and services supply, which includes employees, government dues. 

Committee of Creditors: Functioning, Composition and Significance

Role & responsibility of Committee of creditors

Based on the Corporate Insolvency Resolution Process under the code, the committee of creditors have multiple roles and responsibilities to fulfil. Here are some major responsibilities:


  • All important decisions are finalized after the approval from the creditors of the committee of creditors.
  • Committee of creditors are liable to decide about the restoration of the corporate debtor by accepting the resolution plan.
  • They decide about the interim resolution professional as resolution professional or they can even decide to replace the insolvency professional as resolution professional.
  • They conduct regular meetings in which the rules are discussed for the working of interim resolution professionals that ultimately determines the fate of the corporate debtor.
  • The esteemed committee of creditors functions on the administrative decisions taken by the resolution professional.
  • They are responsible for the evaluation and approval of the resolution plan along with the modification, if any required.
  • Once the committee of creditors is confident about the practicality and viability of the proposed resolution plan, they can approve it with the mandate of more than 66% of the vote.


Composition of committee of creditors

The formation of the Committee of Creditors (CoC) holds the position of a higher authority in the Corporate Insolvency Resolution Process (CIRP). All the decisions related to the administration of the corporate debtor are to be taken by the creditors of the Committee of creditors in the meeting, based on the majority vote count of the members.


According to the code, Section 18 and Section 21 directs the Interim Resolution Professional to constitute the Committee of Creditors, once the collation of all the claim proof is done. Whereas, the sub-section (2) of Section 21, clearly indicates that shall encompass ‘all the financial creditors of corporate debtors’.


Powers of committee of creditors

Being an authoritative entity, a committee of creditors are majorly involved in the decisions and also determine the proceedings, actions and role of the creditors. Here are some of the powers that are given to them as per the regulations of code:


  • The committee of creditors have the power to decide about the regular functioning of the corporate debtor and also can take the important decisions in the company’s favor.
  • They can approach the adjudicating authority as it is the national company law tribunal, especially when there is a doubt of any foul play.
  • They can apply to the adjudicating authority to change the interim resolution professional if needed.
  • They can choose to proceed ahead with the liquidation process of the corporate debtor even without any approval on any resolution plan.
  • They are empowered to exercise their commercial wisdom to take any decision for the corporate debtor. This is implied on the committee of creditors as they have a better knowledge on the subject and are competent in addressing the serious situation of the company under distress.
  • Also, they are authorized to reduce the notice period, which ranges between five days to 24 hours, only when it's necessary. If there is an authorized representative, the minimum notice period is 48 hours.

Therefore, all the above mentioned powers are given to the committee of creditors strictly according to the insolvency and bankruptcy code, 2016.



From the above points, the role and relevance of the committee of creditors has been reflected and how they can take up their roles and responsibilities in the right direction towards fulfilling the process of corporate insolvency resolution. Though the conditions and demands vary depending on the case they are dealing with, the core areas to remain active as a committee member remains the same. 

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