IBBI Revises the Valuation Framework under the Pre-Packaged Insolvency Resolution Process

The key implications of the amendments are as follows:

1. Revised Definition of Fair Value [Regulation 2(1)(g)]: The definition of “fair value” has been amended to now include an Explanation that the estimated realizable value of the corporate debtor shall be computed after taking into account the total estimated realizable value of all the assets of the corporate debtor including but not limited to tangible and intangible assets, along-with their underlying synergies.

2. Two Sets of Registered Valuers [Regulation 38]: The word “sets of” has been inserted to clarify that the resolution professional shall appoint two sets of registered valuers. 

3. Overhauled Valuation Process [Regulation 39(1)]: Regulation 39(1) has been amended to include ‘asset-class’ based valuation with coordinating valuers in each set of registered valuers, a pre-valuation methodology meeting with the Committee of Creditors (CoC), and Insolvency and Bankruptcy Board of India (IBBI) -notified valuation standards. Each registered valuer shall, after physical verification of the inventory and fixed assets of the corporate debtor, submit to the resolution professional and the coordinating valuer of their respective set, a report on the fair value of the assets of the corporate debtor and the liquidation value, computed in accordance with such standards.

4. Standardised Valuation Reports [New Regulation 39(1A)]: A new sub-regulation has been inserted requiring registered valuers to prepare valuation reports and maintain documentation in the format notified by the IBBI through circular.