Liquidation of a corporate debtor involves the selling of its assets completely and the distribution of the sale proceeds among its various creditors.

Under IBC, there is a time period for Corporate Insolvency and Resolution Process (CIRP), ie of 330 days. If the resolution process where the company is restructured as a going concern is failed, it can be liquidated. Even before that, the Committee of Creditors (CoC) can vote for liquidation. Then, the NCLT can order the liquidation of the company after the CoC resolution.

Section 53 of the IBC sets out the priority in which the proceeds of liquidation will be distributed among creditors and other parties related to the corporate. The order of priority for the distribution of proceeds under the IBC is similar to the order for distribution under a winding up under the Companies Act, but with some significant differences. The major difference is that in the case of IBC, unsecured financial creditors have higher priority vis a vis other creditors.

August 15, 2019
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