Compromises, Arrangements & Amalgamation

Question 1

Between whom compromises and arrangement take place?

Answer 1

1) Company and creditor or class of it

2) Company or member or class of it

Question 2

Who files the application for compromises and arrangements? (1)

Answer 2

1) Company
2) Creditor
3) member
4) Liquidator in case of voluntary liquidation

Question 3

What disclosure are required while filling the application? (2)

Answer 3

a) all material facts (eg: Financial position, latest auditor report)
b) reduction of share capital
c) any scheme of corporate debt restructuring consented by not less than 75 of the secured creditors.

Question 4

What is corporate debt restructuring and what are the disclosures required in such case?

Answer 4

Corporate debt restructuring is the reorganization of a distressed company’s outstanding obligations to restore its liquidity and keep it in business. Occasionally, some of a company’s debt may be forgiven by creditors in exchange for an equity position in the company. Disclosures are as follows:

1) A creditors responsibility statement
2) Safeguards for the protection of the other secured & unsecured creditors
3) Auditor report confirming the liquidity test
4) If company is adopting corporate debt restructuring as per RBI, a statement to that effect
5) A valuation report in respect of shares & property and asset by registered valuer