Q.Global Finance Limited is in financial difficulty and wishes to propose a scheme to restructure the amounts it owes to its creditors, extending repayment terms across the board. What kind of meeting must the company arrange for this purpose, who must order it, and what majority of creditors must approve the scheme for it to bind all of them?

Changing what a company owes its creditors as a class cannot be decided by the company alone — it needs a Tribunal-ordered meeting of creditors and a specific supermajority of them to agree before the scheme can bind the whole class. …

Global Finance Limited wants to propose a compromise or arrangement with its creditors — restructuring what it owes them is exactly the kind of matter Section 230 of the Companies Act, 2013 governs.

The company must apply to the National Company Law Tribunal (NCLT), which, if satisfied that the proposal deserves consideration, orders a meeting of the creditors (or of the relevant class of creditors) to be called, held, and conducted in the manner it directs, with full and fair disclosure of the terms of the proposed restructuring and its likely effect sent along with the notice.

For the scheme to become binding on all creditors of that class, a majority in number, representing three-fourths in value, of the creditors present and voting (in person or by proxy) at that meeting must agree to it. Even after this supermajority is obtained, the scheme takes legal effect only once the Tribunal itself sanctions it — the creditors' approval alone is not sufficient without the Tribunal's sanction. …

Students sometimes state only the majority requirement (three-fourths in value) and forget the equally necessary 'majority in number' component, or forget that Tribunal sanction is require …