Section 25A of The Insolvency and Bankruptcy Code, 2016.
1[25A. Rights and duties of authorised representative of financial creditors.-- (1) The authorised representative under sub-section (6) or sub-section (6A) of section 21 or sub-section (5) of section 24 shall have the right to participate and vote in meetings of the committee of creditors on behalf of the financial creditor he represents in accordance with the prior voting instructions of such creditors obtained through physical or electronic means.
- (2)It shall be the duty of the authorised representative to circulate the agenda and minutes of the meeting of the committee of creditors to the financial creditor he represents.
- (3)The authorised representative shall not act against the interest of the financial creditor he represents and shall always act in accordance with their prior instructions: Provided that if the authorised representative represents several financial creditors, then he shall cast his vote in respect of each financial creditor in accordance with instructions received from each financial creditor, to the extent of his voting share: Provided further that if any financial creditor does not give prior instructions through physical or electronic means, the authorised representative shall abstain from voting on behalf of such creditor. 2[(3A) Notwithstanding anything to the contrary contained in sub-section (3), the authorised representative under sub-section (6A) of section 21 shall cast his vote on behalf of all the financial creditors he represents in accordance with the decision taken by a vote of more than fifty per cent. of the voting share of the financial creditors he represents, who have cast their vote: Provided that for a vote to be cast in respect of an application under section 12A, the authorised representative shall cast his vote in accordance with the provisions of sub-section (3).]
- (4)The authorised representative shall file with the committee of creditors any instructions received by way of physical or electronic means, from the financial creditor he represents, for voting in accordance therewith, to ensure that the appropriate voting instructions of the financial creditor he represents is correctly recorded by the interim resolution professional or resolution professional, as the case may be. Explanation.-- For the purposes of this section, the "electronic means" shall be such as may be specified.]
Summary
- An authorised representative is a person appointed to act and vote on behalf of a class of financial creditors, which are lenders like bondholders or depositors who have lent money to a company.
- The representative is required to attend meetings of the committee of creditors, which is the decision making body of the lenders, and vote in accordance with the prior instructions of each creditor they represent.
- The representative must circulate the agenda and minutes of the committee meetings to the financial creditors they represent to keep them informed.
- If representing multiple financial creditors, the representative must cast votes for each creditor in accordance with their individual instructions to the extent of their voting share.
- For certain groups of creditors, the representative must cast all votes in one block based on how the majority, which means more than fifty percent, of those who actually voted decided.
- If any financial creditor does not provide prior instructions, the representative must abstain from voting on behalf of that specific creditor.
Practical examples
FAQ
1. What is the main role of an authorised representative under Section 25A of The Insolvency and Bankruptcy Code, 2016?
Under Section 25A of The Insolvency and Bankruptcy Code, 2016, the main role of an authorised representative is to represent a class of financial creditors in committee meetings, circulate the agenda and minutes, and vote on behalf of those creditors according to their instructions.
2. How does an authorised representative vote when representing multiple creditors under Section 25A of The Insolvency and Bankruptcy Code, 2016?
Under Section 25A of The Insolvency and Bankruptcy Code, 2016, the representative must cast votes for each financial creditor separately in accordance with the individual instructions received from each creditor to the extent of their voting share.
3. What happens if a financial creditor does not give voting instructions to their representative under Section 25A of The Insolvency and Bankruptcy Code, 2016?
Under Section 25A of The Insolvency and Bankruptcy Code, 2016, if a financial creditor does not provide prior instructions, the authorised representative must abstain from voting on behalf of that specific creditor.
4. Is there an exception where the authorised representative votes based on a majority decision under Section 25A of The Insolvency and Bankruptcy Code, 2016?
Yes, under Section 25A of The Insolvency and Bankruptcy Code, 2016, for certain classes of creditors, the representative must cast a single unified vote on behalf of all represented creditors based on the decision of more than fifty percent of the voting share of those creditors who actually cast their vote.
Test yourself
Q1.Under Section 25A of The Insolvency and Bankruptcy Code, 2016, what must the authorised representative do with the agenda and minutes of the committee of creditors meeting?
Q2.Under Section 25A of The Insolvency and Bankruptcy Code, 2016, if a represented creditor does not provide any voting instructions, how must the representative act?
Q3.Under Section 25A of The Insolvency and Bankruptcy Code, 2016, what is the required majority percentage of those voting for the representative to cast a unified vote for a class of creditors?
Q4.Under Section 25A of The Insolvency and Bankruptcy Code, 2016, which of the following processes requires the representative to vote strictly on individual instructions rather than the majority class rule?