Question

    Under the Insolvency and Bankruptcy Code, 2016, which of

    the following is NOT a priority in the order of payment to creditors during the Corporate Insolvency Resolution Process (CIRP) ?
    A Insolvency resolution process costs and fees Correct Answer Incorrect Answer
    B Secured creditors Correct Answer Incorrect Answer
    C Operational creditors, including employees Correct Answer Incorrect Answer
    D Unsecured creditors Correct Answer Incorrect Answer
    E Preference shareholders Correct Answer Incorrect Answer

    Solution

    The order of priority during the distribution of assets in the event of liquidation under IBC is as follows:

    1. Insolvency Resolution Process Costs (highest priority)
    2. Secured creditors , including their dues (after they are paid, if there are any remaining funds)
    3. Operational creditors , including employees and workmen (such as wages, unpaid dues)
    4. Unsecured creditors (such as suppliers and bondholders)
    5. Equity shareholders (last in line for payment)
    • Preference shareholders are not prioritized in the liquidation process under the IBC, as they rank after creditors but before equity shareholders .

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