Liquidation is a process in which the company is brought to an end. Also, the assets and property of the company are redistributed to the creditors and owners. Liquidation is also referred to as winding-up or dissolution, although dissolution technically refers to the last stage of liquidation.

Liquidation may either be compulsory or voluntary. The term liquidation is also used to describe that a company seeking it is ready to divest some of its assets. For instance, a retail chain may wish to close some of its stores.

Insolvency & Bankruptcy Code (IBC)

The first and foremost step in a corporate insolvency resolution process is to make every possible attempt to restore the business entity and restart it. It is generally achieved by preparing a ‘resolution plan’ and implementing it.

But if that doesn’t work out, then the process that follows is liquidation. The interesting thing to remember is that in no way does the IBC Preamble refer to liquidation, which is only used as a last resort if either there is no resolution plan or the resolution plans proposed are not up to the mark.

Also, in the liquidation process, the liquidator can sell the corporate debtor’s business as a going concern.

Liquidation Order

The liquidation order can be passed by the Adjudicating Authority (AA) in the following scenarios:

  • When a resolution plan is not received before the specified time
  • When the Adjudicating Authority (NCLT) rejects the resolution plan submitted
  • When the Committee of Creditors (CoC) approved to liquidate the corporate debtor
  • When the corporate debtor contradicts an approved resolution plan


After the adjudicating authority passes an order for liquidation, the resolution professional who was appointed for the corporate insolvency resolution process can act as the liquidator. Also, he can be replaced by the Adjudicating Authority under the IBC. The liquidator should be eligible as per the code, and he/she should discharge the duties till the completion of liquidation.

Related Terms

    • Voucher

      Any written documentation supporting the entries reported in the account books, indicating the transaction’s accounting accuracy, can be referred to as a voucher.

    • Tender

      When it comes to the business industries, there is a lot of dealing and trading of goods and services that takes place.

    • Debit Note

      A debit note is a document a seller uses to remind the purchaser of current debt obligations, or a document produced by a purchaser when returning goods purchased on loan.

    • NPA, Non Performing Assets

      It refers to those loans and advances that are in default or in arrears i.

    • Cash conversion cycle

      The cash conversion cycle (CCC) is a metric that measures how long it takes a company (in days) to transform its stock and other resources or financial assets into sales cash flows.

  • Shutdown Point

    A point at which a businessman thinks that there is no benefit in continuing the business operations and decides to shut down the business either temporarily or permanently is called the shutdown point.

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