IBBI Discussion Paper on Valuation under IBC: Key Proposals and Their Impact
Table of Contents
Valuation is a key component of the Insolvency and Bankruptcy Code (IBC), ensuring that the value of a corporate debtor’s assets is maximized during the Corporate Insolvency Resolution Process (CIRP). It computes fair value—the estimated realizable value of assets under normal market conditions if the business continues as a going concern—and liquidation value, which reflects the realizable value under forced sale circumstances. These values guide the Committee of Creditors (CoC) in evaluating resolution plans, ensuring bids exceed the liquidation floor, and allowing informed decisions between revival and liquidation. On November 14, 2025, the Insolvency and Bankruptcy Board of India (IBBI) issued a Discussion Paper proposing reforms to strengthen the valuation framework by standardizing report formats, harmonizing valuation standards across processes, expanding the definition of fair value to include intangibles and synergies, and introducing a coordinator-valuer mechanism—all with the goal of improving valuation transparency, accountability, and consistency. This blog will examine the key proposals and the underlying reasons behind each one. It will also investigate the potential implications of these proposals for various stakeholders.
Understanding the Role of Valuation under IBC
Valuation is critical in the CIRP because it determines the corporate debtor’s fair value and liquidation value, allowing for informed decision-making and value maximization. It serves as a necessary benchmark for the CoC when evaluating resolution plans and deciding whether to revive or liquidate the company. Under IBC regulations, the Resolution Professional (RP) is responsible for appointing Registered Valuers, who are IBBI-certified experts who conduct independent valuations of asset classes such as land, buildings, and machinery. More specifically, Regulation 27 of the IBBI (Insolvency Resolution Process for Corporate Persons) Regulations, 2016 (“CIRP Regulations”). requires the RP to appoint two registered valuers within seven days of their appointment to determine the corporate debtor’s fair and liquidation value. The CoC oversees this process, reviewing the valuation reports provided by the RP to determine the viability of resolution proposals. If the two valuations have a “significant difference” (25% or more), the RP may appoint a third registered valuer, with the average of the two closest estimates generally considered the final valuation.
Current Valuation Framework under IBC
- Appointment of Registered Valuers: The IBC’s valuation framework revolves around determining a corporate debtor’s fair and liquidation value to guide resolution, as governed primarily by Regulation 35 of the CIRP Regulations. It requires the Resolution Professional to appoint Registered Valuers to ensure a transparent, credible asset valuation, which will serve as a baseline for the CoC. This valuation is crucial for determining the viability of resolution plans and ensuring stakeholders make informed decisions.
- Determination of Fair Value and Liquidation Value: Fair Value is the estimated price an asset would fetch in an orderly transaction between market participants, whereas Liquidation Value is the estimated amount expected from a forced, quick sale. These figures are used to calculate the minimum payment to dissenting financial and operational creditors, ensuring that the resolution plan is preferable to liquidation. They provide a floor value for determining the feasibility of bids, ensuring creditors receive the highest possible value in comparison to a liquidation scenario.
- Challenges in the Existing Valuation Process: Significant differences frequently exist between valuation reports from two independent valuers, making it difficult to determine the true value, necessitating a third valuation. There is a lack of standardization in valuation methodologies and reporting formats, which frequently causes disputes and delays among stakeholders. Finally, limited accountability mechanisms for valuers and high subjectivity in assessing assets, particularly synergies and intangible assets, lead to disagreements and undermine trust in the process.
Key Proposals in the IBBI Discussion Paper on Valuation
- Clearer responsibilities: Proposals seek to define specific roles for valuers, clients, and oversight bodies in order to remove ambiguity from valuation engagements. This includes requiring documented engagement letters, precise scope definitions, and explicit accountability for relying on expert inputs. Such clarity ensures that all parties understand their responsibilities, reducing disputes and increasing the reliability of valuation results.
- Enhanced professional accountability: Valuers must strictly adhere to valuation standards, keep records for at least three years, and follow ethical principles such as integrity, objectivity, and due care. Regulatory bodies, such as the IBBI and MCA, have the authority to investigate misconduct, issue show-cause notices, and impose penalties, such as registration suspension or cancellation. This framework improves accountability and prevents negligence or bias in valuation reports.
- Increased scrutiny of valuation methodologies: There is a growing emphasis on reviewing the assumptions, inputs, and model integrity that underpin valuation methods. Back-testing is encouraged, as is the validation of cash flow forecasts and the transparency with which value conclusions are reached. Regulatory and audit scrutiny now requires justification of method selection, sensitivity analysis of key assumptions, and complete disclosure of limitations or deviations.
- Need for uniform valuation approaches: The fragmented regulatory landscape in India, which includes the Companies Act, IBC, SEBI, RBI, and FEMA, has resulted in inconsistent valuation practices. A unified framework is required to ensure consistency across sectors and jurisdictions, particularly in cross-border and complex transactions. Standardized approaches reduce subjectivity, improve comparability, and boost stakeholder trust in valuation outcomes.
- Possible guidelines for valuation reports: Reports should include the valuation standard used, the scope of work, methodology, key assumptions, and limitations. They must disclose any reliance on third-party inputs and clearly state the basis for value (e.g., going concern, liquidation). Best practices also recommend including sensitivity analyses, market assumptions, and a clear audit trail of significant decisions and changes.
- Improved Transparency in Valuation Reports: Proposals for detailed disclosures in valuation reports call for entities to provide comprehensive information on the inputs, assumptions, and methodologies used, particularly for Level 3 fair value measurements. This includes clear explanations of unobservable inputs, sensitivity analyses, and the rationale for key assumptions, which improves stakeholder understanding and trust. Greater transparency helps to prevent manipulation and allows investors, regulators, and auditors to make more informed decisions.
- Addressing Significant Variations in Valuation: When large valuation differences arise, one mechanism is to appoint a third-party valuer to conduct an independent assessment, ensuring objectivity and reducing conflicts of interest. A formal review of valuation methodologies can also identify and correct potential errors or biases, such as model appropriateness, data quality, and consistency with industry standards. These mechanisms encourage accuracy, accountability, and consistency in financial reporting, especially in complex or illiquid markets.
Objectives Behind the Proposed Changes
- Ensuring Stakeholder Trust in Valuation Outcomes: The proposals, which include uniform report formats and the appointment of a Coordinator Valuer, seek to reduce fragmented, inconsistent asset-class assessments and provide a comprehensive “true enterprise value” of the corporate debtor. These changes aim to increase stakeholder confidence in valuation outcomes by standardising methodologies and aligning them with international best practices.
- To reduce disputes during CIRP, the proposed guidelines define minimum content, required documentation, and specific valuation parameters for receivables to reduce estimation discrepancies among Registered Valuers. Standardized procedures and a mandatory pre-discussion with the CoC on methodologies are intended to reduce disagreements about valuation results, streamlining the process and lowering litigation.
- Strengthening Professional Standards The amendments tighten documentation requirements, requiring RVs to keep detailed working papers and substantiate assumptions, thereby increasing their liability and accountability for their findings. The IBBI aims to improve the overall quality and consistency of valuation work performed under the IBC by establishing specific professional formats and methodologies for various asset classes (land, machinery, and securities).
Impact of the Proposed Changes on Stakeholders
- Impact on Insolvency Professionals: To avoid relying on unprofessional reports, insolvency professionals (IPs) must exercise greater diligence and follow stricter compliance when appointing registered valuers. They must now maintain improved documentation and rigorous monitoring of the valuation process in order to ensure accountability and reduce delays.
- Impact on Registered Valuers: Registered valuers are subject to increased responsibility and scrutiny, as they must use standardized reporting formats and unique valuation report identification numbers (VRINs). They must improve their valuation methodologies to ensure accurate assessments, such as incorporating intangible assets and going-concern synergies, in order to close the gap between fair and liquidation values.
- Impact on the Committee of Creditors: More reliable and standardized valuation data will improve the CoC decision-making capabilities. With the addition of a coordinating valuer, they can make informed, commercial decisions based on a comprehensive enterprise-level valuation rather than fragmented, asset-specific reports.
- Impact on Resolution Applicants: Resolution Applicants benefit from increased clarity and transparency regarding asset valuation, allowing them to make more accurate and competitive bids during the insolvency process. Furthermore, with the fair value of assets made available, they can speed up their due diligence and create better, more sustainable resolution plans.
Practical Challenges in Implementing the Proposed Changes
- Increased compliance burden: The proposed standardised templates, mandatory documentation protocols, and the appointment of a Coordinator Valuer may significantly increase the administrative workload for valuers, resolution professionals, and creditors’ committees, potentially slowing down insolvency proceedings.
- Cost implications for CIRP: While the single-valuer option for small debtors is intended to reduce costs, the overall framework—including multiple valuations, coordination mechanisms, and detailed reporting—may increase costs for larger cases, undermining the goal of cost-effective resolution.
- The need for capacity building among registered valuers: The transition to enterprise-level valuation, including intangibles, and complex integration processes necessitates advanced skills and training; without targeted capacity building, valuers may struggle to meet the new standards, resulting in inconsistent or flawed assessments.
Relevance for Insolvency Professionals and Aspirants
- This discussion paper is significant because it outlines proposed regulatory updates that will directly influence how valuations are conducted under the IBC, requiring IAs to stay current on new standards and formats.
- It is critical for IP examination preparation because it introduces significant changes to valuation methodology, report structure, and documentation requirements that will likely appear in future assessments.
- It demonstrates the evolving regulatory framework under the IBC, with a focus on standardization, enterprise-level valuation, and increased transparency to improve resolution outcomes.
Conclusion
Accurate and transparent valuation is critical to the success of IBC-based insolvency resolution because it ensures fair recovery for creditors, informed decision-making by the CoC, and avoids resource misallocation. The IBBI Discussion Paper on Strengthening the Valuation Process seeks to improve trust, transparency, and efficiency in the CIRP by addressing long-standing issues such as inconsistent report formats, a lack of standardization, and disparate valuation methods. Key proposals include standardizing valuation report formats, harmonizing standards across CIRP, liquidation, and other processes, and taking a holistic approach to determining fair value that takes into account intangibles and synergies. These reforms aim to improve the credibility and comparability of valuations, reduce litigation, and shorten resolution times. Stakeholder feedback, which is being solicited through the IBBI website until December 10, 2025, will be critical in shaping the final regulations and ensuring practical, enforceable guidelines. Finally, these reforms seek to establish a more robust, reliable, and globally consistent valuation framework within India’s insolvency ecosystem.
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