Valuation Under IBC
Insolvency and Bankruptcy Code, 2016 is one of the biggest corporate reform during Modi Government Regime. It has changed the entire landscape from the "defaulter in control" to "creditor in control". The recovery under the IBC depends on the valuation of the assets of the corporate debtor.
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You will be able to track your case with a personal account
Read MoreThe approval of Resolution plan depends on the determination of fair value and liquidation value by the Registered Valuer. It is imperative that quality of the Registered Valuer is sine qua non for the success of the IBC regime. IBBI is taking lot of efforts to enahnce the quality of the Registered valuers. Our team is consists of seasoned valuation professionals to help the Resolution Professional and Committee of Creditors in the effective decicion making.
Just like there are certain rights given to all employees in India, irrespective of them working in the private or public sector, all employers are also entitled to certain rights. These basic rights are proportional to an employer’s duty to make the workplace as comfortable and employee-friendly as possible.
Clause 2(hb): “Fair Value” means the estimated realizable value of the assets of the corporate debtor, if they were to be exchanged on the insolvency commencement date between a willing buyer and a willing seller in an arm’s length transaction, after proper marketing and where the parties had acted knowledgeably, prudently and without compulsion. Clause 2(k): “Liquidation Value” means the estimated realizable value of the assets of the corporate debtor, if the corporate debtor were to be liquidated on the insolvency commencement date. As per Regulation 35 of CIRP Regulations, the Fair Value and Liquidation Value shall be determined in the following manner: - a. the two Registered Valuers appointed under regulation 27 shall submit to the Resolution Professional an estimate of the Fair Value and of the Liquidation Value computed in accordance with internationally accepted valuation standards, after physical verification of the inventory and fixed assets of the Corporate Debtor; b. if in the opinion of the Resolution Professional, the two estimates of a value are significantly different, he may appoint another Registered Valuer who shall submit an estimate of the value computed in the same manner; and c. the average of the two closest estimates of a value shall be considered the fair value or the Liquidation Value, as the case may be.
Fair Value and Liquidation Value are to be determined on the insolvency commencement date which is a historical date and to that extent; it is expected from the valuer to collect input and information with reference to that date. It may not be practically possible for the valuer to identify willing buyer on historical date and ascertain the Fair Value. Therefore, the valuer may have to collect market prices, published information and other publicly available data to arrive at Fair Value and Liquidation Value. Genereally, IBC companies do not have up to date accounting information, latest audited accounts and fixed asset register. Perhaps for this reason, IBC requires the valuer to conduct physical verification of the inventory and fixed assets of the Corporate Debtor. However, there are several other buckets in which assets may fall which are not physically verifiable such as debtors, claims, loans and advances. It is advisable that in case of incomplete and missing information; the valuer shall mention it in the valuation report along with the reasonable assumptions made to arrive at Fair Value and Liquidation value.
Valuation under IBC
