CORPORATE VOLUNTARY ARRANGEMENT

A company, subject to Section 395 of the Companies Act 2016, may enter into a binding compromise or arrangement with its creditors without the need for the compromise or arrangement to be approved by the Court. Pursuant to Section 396 of the Companies Act 2016, a director of the debtor company may make a proposal to the company and its creditors for a voluntary arrangement and the proposal for the voluntary arrangement shall include the appointment of a nominee either as a trustee or supervisor for the purpose of supervising the implementation of the voluntary arrangement. The proposal for voluntary arrangement shall be in compliance with Section 397 of the Companies Act 2016.

A moratorium in a voluntary arrangement shall be in accordance with Section 398 and the Eighth Schedule of the Companies Act 2016 and commences automatically from the time of filing the required documents by the company to the Court. The moratorium shall remain in force for twenty-eight days. The period may be extended for up to a maximum of sixty days counted from the commencement of the moratorium. Where a moratorium is in force, a meeting shall be summoned in accordance with Section 399 of the Companies Act 2016 within the period specified in the Eighth Schedule and the meeting shall be conducted in accordance with the rules of meeting as provided in the Companies Act 2016

A meeting summoned under Section 399 of the Companies Act 2016 shall decide whether to approve the proposed voluntary arrangement or otherwise. The required majority to approve the proposal for voluntary arrangement in the creditors’ meeting shall be seventy-five percentum (75%) of the total value of creditors present and voting at the meeting either in person or by proxy. At the same time, a simple majority is required to pass a resolution to approve the proposal for voluntary arrangement in a meeting of members. However, a meeting summoned under Section 399 of the Companies Act 2016 shall not approve any proposal which affects the rights of a secured creditor of a company to enforce his security, except with the concurrence of the secured creditor concerned.

Once approved by the required majority, the proposed voluntary arrangement shall take effect and be binding on all creditors of the company whether or not the creditors have voted in favour of the proposal.

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