Valuation under IBC
Under the Insolvency and Bankruptcy Code (IBC) in India, valuation plays a crucial role in the insolvency resolution process. Valuation is required for various purposes as stipulated in different sections of the IBC. Here is a list of common purposes for which valuation is conducted under the IBC, along with the relevant sections:
- Valuation for the Resolution Process –
Section 35: Valuation is conducted to determine the value of the corporate debtor’s assets and liabilities as part of the resolution process. - Valuation for the Insolvency Resolution Plan –
Section 30(2): Valuation is essential for the insolvency resolution professional (IRP) to invite prospective resolution applicants to submit resolution plans. - Valuation for Liquidation –
Section 35: Valuation is necessary in case the insolvency resolution process fails, and the company goes into liquidation. It determines the value of assets for distribution among creditors during the liquidation process. - Valuation for Operational Creditors –
Section 30(4): Valuation plays a role in determining the treatment of operational creditors in the insolvency resolution plan. - Valuation for Secured Creditors –
Section 30(2)(e): Valuation is used to assess the value of security interest held by secured creditors in the assets of the corporate debtor. - Valuation for Sale of Assets –
Section 36: Valuation is conducted when assets are sold during the insolvency resolution or liquidation process. - Valuation for Debt Recovery –
Section 30(4): Valuation helps in assessing the financial recovery for financial creditors under the resolution plan. - Valuation for Creditors’ Committee –
Section 21(8)(b): Valuation is used to assess the viability of a corporate debtor and the availability of assets for distribution among creditors. - Valuation for Adjudicating Authority –
Section 32(2)(b): Valuation may be presented to the Adjudicating Authority to decide on the insolvency resolution process. - Valuation for Corporate Insolvency Resolution –
Section 31(2): Valuation is essential for the insolvency resolution process to determine the value of the corporate debtor’s assets for resolution and distribution among creditors. - Valuation for CIRP Committee –
Section 12(2): Valuation may be conducted to ascertain the fair value and liquidation value of the corporate debtor’s assets and is used in the selection of a resolution professional by the Committee of Creditors. - Valuation for Decision-Making by Creditors –
Section 25(2)(h): Valuation may be used by the Committee of Creditors to make informed decisions regarding the acceptance or rejection of a resolution plan. - Valuation for Resolution Plans –
Section 29A: Valuation is essential when submitting a resolution plan. Prospective resolution applicants are required to include details of the valuation of assets in their plans. - Valuation for Avoidance Transactions –
Section 43: Valuation may be conducted in cases of avoidance transactions to determine the value of transactions that may be considered fraudulent or preferential. - Valuation for Adjudicating Authorities –
Section 65: Valuation may be used as evidence in proceedings before the Adjudicating Authority under the IBC. - Valuation for Recovery and Distribution –
Section 53: Valuation is used to determine the hierarchy and priority of claims in the event of distribution of assets during liquidation. - Valuation for Operational Creditors –
Section 18: Valuation is relevant for determining the value of debt owed to operational creditors as part of the insolvency resolution process. - Valuation for Asset Classification –
Section 6: Valuation is used to classify assets into different categories for the purpose of the IBC proceedings. - Valuation for Insolvency Professionals –
Section 41: Valuation may be conducted by insolvency professionals to assess the value of assets and liabilities of the corporate debtor during the resolution process.
These are common purposes for which valuation is conducted under the Insolvency and Bankruptcy Code (IBC) in India, along with the relevant sections of the IBC. Valuation is a critical element in the IBC process, ensuring transparency and fairness in the resolution and liquidation of insolvent companies.
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