IBBI releases a Discussion Paper on Corporate Liquidation Process

Resources are scarce and have competing requirements. Further, the market and organizational failures do happen in a dynamic market conditions, requiring the reallocation of capital from inefficient to efficient uses and redeployment from failing companies to the ones which have better ideas about the ways and means to enhance the efficiency of the scarce capital. The Insolvency and Bankruptcy Code, 2016 (‘Code’) provides a structured mechanism to rescue the failing but viable firm and liquidate the non-viable ones. It results in releasing of the idle resources for competing uses, thereby promoting entrepreneurship. During liquidation process, the liquidator forms an estate of assets of the Corporate Debtor (CD), holds it as a fiduciary for the benefit of all stakeholders and distributes the proceeds from the liquidation estate as per priority established under section 53 of the Code.
Two issues determining the corpus of liquidation estate and the entitlement of stakeholders under section 53 of the Code have been presented in the discussion paper released by IBBI on Corporate Liquidation Process, for facilitating public discussion and their comments on these issues which need a de-nova examination and consequent changes in the regulations.

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