Section 25A of IBC : Section 25A: Rights And Duties Of Authorised Representative Of Financial Creditors

Explanation using Example

Imagine a scenario where a company, XYZ Private Limited, is undergoing insolvency proceedings under the Insolvency and Bankruptcy Code, 2016. The company owes money to a number of financial creditors, including several homebuyers who have invested in the company's housing project. These homebuyers are considered financial creditors because they have provided an advance for their homes, which is a financial debt owed by XYZ Private Limited.

Due to the large number of homebuyers, they appoint an authorised representative to attend the Committee of Creditors (CoC) meetings on their behalf. This representative is responsible for voting in line with the homebuyers' interests. Before the meeting, the authorised representative collects voting instructions from the homebuyers through an online portal, ensuring each creditor's voice is heard.

At the CoC meeting, the representative participates and votes according to the instructions provided by the homebuyers. For some decisions where the representative has not received explicit instructions from a particular homebuyer, he abstains from voting on their behalf, as per Section 25A(3) of the Insolvency and Bankruptcy Code.

Furthermore, the authorised representative ensures that all homebuyers are kept informed by sharing the agenda and minutes of the CoC meetings with them. This helps maintain transparency and allows the homebuyers to understand the proceedings of their case.

In this way, Section 25A of the Insolvency and Bankruptcy Code, 2016, ensures that the rights of financial creditors are protected and their interests are represented adequately during the insolvency resolution process.