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Govt Policy and Schemes:Insurance:

In other words, bringing in new investors and diluting the control of the existing promoter cannot b

By: GK Gupta,      Update:29 Aug 2017
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In other words, bringing in new investors and diluting the control of the existing promoter cannot be pushed through by sidestepping or violating the Companies Act, 2013. 


Almost all significant decisions — such as offering preference shares to infuse funds into a defaulting company, selling properties and assets, floating convertibles, and declassifying the promoter following a dilution of shareholding - have to be approved by shareholders of the company in question; and some key decisions have to be cleared by a special resolution, requiring the support of 75% shareholders. 


ince existing promoters, who resist giving up control, are also significant stakeholders in such companies, they could oppose key resolutions to frustrate lenders. A few weeks ago, members of some of the top law firms met in Mumbai to discuss possible hurdles in the course of executing the code. It was felt that in several cases one would have to obtain exemptions from the ministry of corporate affairs to allow insolvency professionals to rope in investors without seeking the permission of share .. 

According to Madhukar R Umarji, a member of the Bankruptcy Law Reforms Committee which drafted the new law, "A Resolution Plan for a company under insolvency will have to be in compliance with the provisions of any law in force, as provided in section 30(2)(e) of IBC,2016." 

In other words, bringing in new investors and diluting the control of the existing promoter cannot be pushed through by sidestepping or violating the Companies Act, 2013. 

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