"The Insolvency and Bankruptcy Code makes significant changes in the priority of claims for distribution of liquidation proceeds". Comment

Section 53 of the Insolvency and Bankruptcy Code 2016 deals with distribution of assets in liquidation. The Insolvency and Bankruptcy Code, 2016 makes significant changes in the priority of claims for distribution of liquidation proceeds. In case of liquidation, the assets will be distributed in the following order: fees of insolvency professional and costs related to the resolution process; workmen's dues for the preceding 24 months and secured creditors; employee wages; unsecured creditors; government dues and remaining secured creditors (any remaining debt if they enforce their collateral); any remaining debts and dues preference shareholders, if any; and equity shareholders or partners, as the case may be. Before the enactment of the Code, the government dues were immediately below the claims of secured creditors and workmen in order of priority. Now, the Central and State Government's dues stand below the claims of secured creditors, workmen dues, employee dues and other unsecured financial creditors.