IBBI Issues Comprehensive Valuation Guidelines for Insolvency Proceedings
The Insolvency and Bankruptcy Board of India (IBBI) issued a circular on June 15, 2026 — "Guidelines for Conducting Valuation Under the Insolvency and Bankruptcy Code, 2016" — prescribing standardised valuation procedures for companies undergoing insolvency resolution.
The circular mandates that all valuations under the IBC must conform to International Valuation Standards (IVS), as issued by the International Valuation Standards Council (IVSC), effective April 1, 2026 (Circular No. IBBI/RV/93/2026).
New receivables valuation methodology requires registered valuers to consider credit risk, ageing of receivables, counterparty profile, and prevailing economic conditions — replacing ad hoc approaches that had led to disputed valuations in Committee of Creditors (CoC) proceedings.
The guidelines prescribe standardised documentation requirements, report formats, and the duties and independence standards of registered valuers — addressing a key gap in the CIRP process where inconsistent valuations had complicated resolution plan negotiations.
The IBBI also amended the definition of "fair value" in CIRP regulations: it now represents the estimated realizable value of the corporate debtor including tangible and intangible assets and underlying synergies, as on the insolvency commencement date.
Disclosure requirements for receivables (trade receivables, inter-corporate receivables, and contract receivables) are now codified, improving transparency for CoC decision-making.
Insolvency and Bankruptcy Code (IBC) 2016
The IBC, enacted on May 28, 2016, replaced a fragmented pre-existing framework of multiple laws (Sick Industrial Companies Act 1985 / SICA, the Companies Act provisions on winding-up, the Presidency Towns Insolvency Act, the Provincial Insolvency Act) and consolidated India's insolvency and bankruptcy law under a single, time-bound framework.
IBBI, as the regulatory authority, issued the June 15, 2026 valuation guidelines under its rule-making powers. The guidelines govern registered valuers — a category of professionals that IBBI registers and regulates.
Corporate Insolvency Resolution Process (CIRP): Timeline
Step 1 — Application: A financial creditor (bank, bond holder), operational creditor (supplier, employee), or the corporate debtor itself files an application with NCLT to initiate CIRP. Default threshold: ₹1 crore (revised from ₹1 lakh in 2020 to reduce frivolous filings).
Valuation (Step 6 above) is a mandatory, pivotal step in CIRP. Disputed or inconsistent valuations have been a recurring source of litigation and CIRP delays — the new IBBI guidelines directly target this bottleneck by standardising methodologies and documentation.
Pre-IBC vs Post-IBC Insolvency Framework
Pre-IBC (before 2016) — key problems:
- Multiple laws governed different types of debtors (companies, individuals, partnerships) with no unified framework
- BIFR (Board for Industrial and Financial Reconstruction) under SICA 1985: Long-drawn process, average case resolution took 4-5 years; became a tool for debt avoidance
- High Non-Performing Asset (NPA) burden on banks due to slow resolution
- Creditors had little practical control; debtors retained management during proceedings
- No time-bound exit through liquidation
Post-IBC achievements (as of 2026):
- Over 7,500 CIRP cases admitted; ~3,000+ resolved through resolution plans or liquidation
- Recovery rate for financial creditors improved to approximately 32-36 cents per dollar (vs near-zero under BIFR)
- Haircuts (creditor losses) remain substantial but recovery timelines have shortened
- Pre-packaged insolvency for MSMEs (introduced 2021) — faster, less disruptive process
- Ongoing criticism: Average CIRP time still exceeds 330-day statutory maximum in many cases
Standardised valuation rules are expected to reduce disputes in the CoC over whether a resolution plan offers fair value — a frequent cause of plan rejection and re-tendering that extends CIRP timelines beyond the statutory limit.
International Valuation Standards (IVS): What They Prescribe
IVS, issued by the IVSC (London-based), are globally accepted standards for asset valuation. Key IVS principles relevant to insolvency:
- Independence: Valuers must be free from conflicts of interest
- Transparency: All assumptions must be disclosed
- Materiality: All factors that significantly affect value must be considered
- Three valuation approaches: Market approach (comparable transactions), Income approach (DCF), Cost approach (replacement cost)
For receivables (now specifically mandated by IBBI):
- Consider credit risk of counterparty (probability of default)
- Ageing analysis: Older receivables are discounted more steeply
- Economic conditions: Macro factors affecting recoverability
IBBI's adoption of IVS aligns India's insolvency valuation framework with international best practices, increasing credibility for foreign investors assessing resolution plans.
- IBBI circular date: June 15, 2026 — Guidelines for Conducting Valuation Under IBC 2016
- IVS mandate circular: IBBI/RV/93/2026 (April 1, 2026) — International Valuation Standards for all IBC valuations
- IBC enacted: May 28, 2016
- CIRP standard period: 180 days; extendable by 90 days (once); maximum 330 days
- Default threshold for CIRP filing: ₹1 crore
- Adjudicating Authority: NCLT (National Company Law Tribunal)
- Appellate body: NCLAT; Supreme Court is final appellate authority
- CoC approval threshold: ≥66% vote by value of financial debt
- Registered Valuers: Regulated and registered by IBBI; must now comply with IVS
- Fair value definition (revised): Estimated realizable value of corporate debtor including tangible, intangible assets and synergies, as on insolvency commencement date
- New receivables criteria: Credit risk + ageing analysis + economic conditions (mandatory)
- IBBI established: October 1, 2016 under IBC 2016; headquartered in New Delhi