Section 174 of IBC : Section 174: Distribution Of Interim Dividend

Explanation using Example

Imagine a situation where a company, XYZ Pvt. Ltd., goes bankrupt and an individual named John is appointed as the bankruptcy trustee. The company has multiple creditors who are owed various amounts. After selling some of the company's assets, John accumulates a substantial amount of money. He decides that it's time to distribute this money to the creditors before the final settlement.

John declares an interim dividend, meaning that the creditors will receive a partial payment now, with the possibility of more payments in the future as more assets are sold. He sends out notices to all the creditors, informing them about the interim dividend and how it will be distributed.

John carefully calculates the interim dividend, keeping in mind that some creditors might be living far away and may not have submitted their claims yet. He also sets aside funds for claims that are still being assessed, for any disputed claims that need resolution, and for covering the ongoing expenses of managing XYZ Pvt. Ltd.'s bankruptcy process.

In this way, the creditors start receiving some of the money they are owed, and John ensures that the bankruptcy process is conducted fairly and transparently, in accordance with Section 174 of The Insolvency and Bankruptcy Code, 2016.