IBBI Adopts International Valuation Standards for Insolvency Valuations in India

The Insolvency and Bankruptcy Board of India has issued a circular dated April 1, 2026, notifying the International Valuation Standards (IVS) as the applicable standards for all valuations conducted under the Insolvency and Bankruptcy Code, 2016. The IVS, issued and updated by the International Valuation Standards Council (IVSC), will apply with immediate effect to valuations of assets, businesses, and liabilities undertaken during corporate insolvency resolution processes, liquidation proceedings, and personal insolvency proceedings under the Code. This replaces the earlier framework where valuations were governed by the Companies (Registered Valuers and Valuation) Rules, 2017, and enables IBBI to prescribe and update valuation standards through circulars rather than through amendments to those rules.

Why Valuation Standards Matter Under the IBC

Valuation is central to every stage of the insolvency process under the IBC. During the corporate insolvency resolution process, the resolution professional is required to obtain valuations of the corporate debtor as a going concern and its liquidation value. These valuations form the basis on which the committee of creditors evaluates resolution plans, determines whether a plan offers more than liquidation value, and decides whether to approve or reject competing bids. In liquidation, valuations determine the reserve price for asset sales and the basis for distribution to stakeholders. Inconsistent or subjective valuation methodologies can lead to significant disputes, undervalue creditor recoveries, and undermine the integrity of the resolution process. The adoption of a globally recognised standard aims to address these concerns by providing a uniform framework for all registered valuers operating under the Code.

What the International Valuation Standards Require

The IVS prescribe a comprehensive framework covering the scope of work, basis of value, valuation approaches, methods, and reporting requirements. They require valuers to clearly define the purpose of the valuation, the basis of value being used (market value, fair value, investment value, or liquidation value), and the assumptions and special assumptions underlying the valuation. The standards mandate disclosure of all material factors that could affect the valuation conclusion, including any limitations on the scope of the valuer's work. They also prescribe requirements for the three recognised valuation approaches: the market approach (using comparable transactions), the income approach (using discounted cash flows or capitalisation of earnings), and the cost approach (using replacement or reproduction cost). Valuers must select and apply the approach or approaches most appropriate to the specific asset, business, or liability being valued.

Regulatory Flexibility Through Circulars

A significant aspect of this reform is the mechanism through which valuation standards are now prescribed. The earlier framework required amendments to the Companies (Registered Valuers and Valuation) Rules, 2017, a process that involved formal rulemaking procedures and could be slow to adapt to evolving market practices. The circular substitutes this with a reference to valuation standards notified by IBBI through circulars from time to time. This gives the Board greater flexibility to update standards as the IVSC revises the IVS, respond to market developments, and address emerging valuation issues such as the valuation of intangible assets, digital businesses, and distressed assets in specific sectors. It also aligns the standard-setting mechanism with the approach taken by other regulators globally, where valuation standards are typically updated through professional guidance rather than statute.

Practical Takeaways

Registered valuers operating under the IBC must immediately familiarise themselves with the IVS framework and ensure that all valuations undertaken from April 1, 2026 onwards comply with these standards. Valuation reports must now reference the IVS as the applicable standard and follow its prescribed format for scope, methodology, and reporting. Resolution professionals should verify that the valuers they appoint are aware of and compliant with the new requirements. Creditors reviewing resolution plans should assess whether the underlying valuations meet IVS standards, as non-compliant valuations could be challenged. Insolvency professionals and legal counsel should update their standard operating procedures and engagement letters to reflect the transition from the 2017 Rules framework to the IVS.