Waterfall Mechanism

The order of priority for distribution of liquidation proceeds under Section 53 of IBC: CIRP costs → secured creditors → workmen dues (24 months) → employee dues (12 months) → unsecured financial creditors → government dues → remaining debts → equity shareholders.

Waterfall Mechanism is governed by the Insolvency and Bankruptcy Code, 2016 and regulated by IBBI. Understanding this concept is essential for ensuring regulatory compliance, avoiding penalties, and making informed corporate decisions in India.

Waterfall Mechanism is relevant for company secretaries, compliance officers, chartered accountants, corporate lawyers, board members, and all professionals dealing with IBC regulatory matters in India.