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8th November 2024 (10 Topics)

Liquidation of Jet Airways

Context

The Supreme Court ordered the liquidation of Jet Airways under the Insolvency and Bankruptcy Code (IBC), marking an end to the five-year saga of attempts to revive the airline through the corporate insolvency resolution route.

What is Liquidation of a Company?

  • The liquidation of a company happens when company assets are sold when it can no longer meet its financial obligations. Sometimes, the company ceases operations entirely and is deregistered. 
  • The Companies Act of 2013regulates the liquidation process.
  • When a company is liquidated, the shareholders’ interest in the company is extinguished, and the company ceases to exist.
  • The company’s assets are sold off to repay its debts and to distribute the remaining funds among its shareholders.
  • Reasons for Liquidating a Company
    • Insufficient funds
    • Lack of business activity
    • Fraud or mismanagement
    • High debt levels
    • Mergers and acquisitions
    • Changes in the law

Insolvency and Bankruptcy Code, 2016 (IBC)

  • The Insolvency and Bankruptcy Code, 2016 (IBC) is the bankruptcy law of India which seeks to consolidate the existing framework by creating a single law for insolvency and bankruptcy
  • When insolvency is triggered under the IBC, there can be two outcomes:
    • Resolution
    • Liquidation

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