What is Insolvency?
professional insolvency valuation services is the situation where a firm or an individual can no longer meet its financial obligations with its lenders as debts become due. It may occur even when liabilities exceed the company’s assets. Generally, in situations like this, the Liquidation Value of the stressed asset is determined and the proceeds from the sale are shared between the creditors and other stakeholders. However, recently there have been changes through amendments to Insolvency and Bankruptcy Board of India (IBBI) detailed valuation under IBC.
In Simple Terms
• IBC is India’s law to resolve insolvency faster and protect creditors.
• The process usually takes 180–270 days with NCLT oversight.
• Valuers, resolution professionals, and creditors play key roles in compliance.
What’s New?
It is now mandatory to consider both the Fair Value and Liquidation Value for stressed asset valuation. The resolution professional will appoint 2 registered valuers to determine these 2 values.
Fair Market Value and Liquidation Value – What’s the difference?
Fair Market value (FMV) is an estimate of the market fairness opinion in restructuring deals. The asset can be bought or sold, and the transaction happens between an unpressured buyer and an unpressured seller.
Whereas
Liquidation Value is the most probable price of an asset when it is allowed insufficient time to sell on the open market. Assets are usually assessed for Liquidation Value when the company goes out of business and is unable to pay bills due to its creditors. Liquidation Value is typically lower than Fair Market Value.
The New Insolvency Resolution Process at a Glance
1. The resolution professional will provide both the fair and the liquidation value to each member of the Committee of Creditors (CoC). Confidentiality of both the values will be maintained by all the people involved – The resolution professional, the registered valuers and the creditors.
2. The resolution professional will send out an invitation to all the prospective resolution applicants. Upon receiving the invitation, the resolution applicants have maximum 30 days to submit the resolution plans.
3. The resolution plan will include measures that can maximise the value of the assets of the insolvent company.
4. The resolution plan approved by the CoC will be submitted to the National Company Law Tribunal by the resolution professional at least 15 days before the maximum period allowed for the completion of the corporate insolvency resolution process expires.
Benefits of the New Resolution Process
Clarity in the resolution plans invitation as well as the approval process
Less scope of litigation by the rejected bidders since the evaluation matrix is pre-approved by CoC and is intimated to all the prospective resolution applicants
The process is more systematic as the format of the invitation of bids from resolution applicants and the timelines are defined
Confidentially is maintained throughout the process.
Need insolvency valuation for IBC compliance? Talk to RNC experts.
FAQs
1. What is insolvency under India’s IBC 2025?
Insolvency under the IBC is a time-bound process to resolve a debtor’s defaults through NCLT-supervised proceedings. It protects creditor interests and maximizes value recovery.
2. What is the insolvency process under IBC 2025?
The process usually includes filing an application, NCLT admission, appointment of an interim resolution professional (IRP), public announcement, formation of the Committee of Creditors (CoC), valuation and submission of resolution plans, and NCLT approval or liquidation.
3. How long does insolvency take in India?
By law, the process should be completed in 180 days, extendable to a maximum of 330 days in exceptional cases including litigation delays. Actual timelines depend on complexity and NCLT workload.
4. Who manages the insolvency process?
The insolvency process is managed by an IRP or Resolution Professional (RP) under the supervision of the NCLT. The Committee of Creditors (CoC) evaluates and approves resolution plans.
5. What is NCLT’s role in insolvency?
The NCLT admits insolvency cases, appoints IRP/RPs, supervises proceedings, approves or rejects resolution plans, and orders liquidation if required.
6. What documents are needed to initiate insolvency?
Key documents include proof of default, financial statements, board or creditor authorizations (as applicable), creditor lists, and details of the proposed IRP, in line with IBBI regulations.
7. What is the role of registered valuers in IBC?
Registered valuers determine the fair value and liquidation value of assets. Their reports guide CoC decisions and help in evaluating resolution plans.
8. How are creditors paid under a resolution plan?
Creditors are paid according to the IBC waterfall structure, prioritizing insolvency resolution costs and secured creditors. The exact distribution depends on the CoC-approved plan and NCLT approval.
About the author:
Sahil Narula
Sahil Narula is the Managing Partner at RNC Valuecon LLP and a Registered Valuer with IBBI. He brings over a decade of experience in Valuation Services, Corporate Finance, and Advisory, having led numerous complex assignments under the Insolvency & Bankruptcy Code, 2016, Mergers & Acquisitions, Insurance, and Financial Reporting.
He is a regular speaker at national forums (ASSOCHAM, CII, ICAI, IBBI, Legal Era) and currently serves as Co-Chairman of ASSOCHAM’s National Council on Insolvency & Valuations and a member of CII’s Task Force on Insolvency & Bankruptcy.
🤝Connect with Sahil on LinkedIn.