Valuation Under the IBC: Fair Value and Liquidation Value
Two sets of valuers, a coordinating valuer each, and an average of the two closest estimates.
In a corporate insolvency resolution process (CIRP), registered valuers give the committee of creditors two numbers. Liquidation value shows what creditors would get if the company were wound up; fair value shows what the business is worth in an arm's length sale. Together they frame the judgement on resolution plans.
The rules changed substantially in 2026. Since 25 February 2026 the resolution professional appoints two sets of valuers, not two valuers, and a coordinating valuer in each set values the corporate debtor as a whole. Since 1 April 2026 all IBC valuations follow the International Valuation Standards. All of this is inside the exam's 30 June 2026 law cut-off.
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The Two Values
- Fair value (regulation 2(1)(hb))
- The estimated realisable value of the corporate debtor or its assets if exchanged on the insolvency commencement date between a willing buyer and a willing seller at arm's length, after proper marketing, the parties acting knowledgeably, prudently and without compulsion. The corporate debtor's value takes in all its tangible and intangible assets along with their underlying synergies.
- Liquidation value (regulation 2(1)(k))
- The estimated realisable value of the corporate debtor's assets if it were liquidated on the insolvency commencement date.
How Fair Value and Liquidation Value Are Fixed in CIRP
- 1
Appoint two sets of valuers (regulation 27(1))
Within 7 days of the resolution professional's appointment, and not later than the 47th day from the insolvency commencement date. For an MSME, one set, unless the committee decides on two for recorded reasons (from 20 May 2026).
- 2
Form each set (regulation 35(1)(a))
One registered valuer for each asset class of the corporate debtor. The resolution professional, consulting the committee, designates one of them as the coordinating valuer of that set.
- 3
Explain the method first (regulation 35(1)(b))
The valuers, including the coordinating valuers, explain their methodology to the committee before computing estimates.
- 4
Value each asset class (regulation 35(1)(c))
After physically verifying inventory and fixed assets, each valuer reports fair value of the assets and liquidation value, under the standards IBBI notifies (IVS, since 1 April 2026).
- 5
Integrate (regulation 35(1)(d))
The coordinating valuer computes the fair value of the corporate debtor from the set's asset values plus underlying synergies. IBBI's 2026 guidelines say this is an integrated value of the business, not a mere sum of asset values.
- 6
Third set if needed (regulation 35(1)(e))
If the two estimates of fair value, or of liquidation value, differ by 25% or more, or the committee proposes it for recorded reasons, the resolution professional may appoint a third set.
- 7
Average the two closest (regulation 35(1)(f)-(g))
Fair value is the average of the two closest coordinating valuers' estimates. Liquidation value is the average of the two closest estimates in each asset class.
Worked Example: Three Sets, Two Closest
Illustration only. A Nashik auto-parts maker in CIRP. Set A's coordinating valuer reports fair value of ₹500 crore and Set B's ₹350 crore. The gap is ₹150 crore, 30% of the higher figure, so a third set is appointed. It reports ₹420 crore.
Set A ₹500 crore and Set C ₹420 crore
Gap
₹80 crore
Closest?
No
Set B ₹350 crore and Set C ₹420 crore
Gap
₹70 crore
Closest?
Yes
Set A ₹500 crore and Set B ₹350 crore
Gap
₹150 crore
Closest?
No
| Pair | Gap | Closest? |
|---|---|---|
| Set A ₹500 crore and Set C ₹420 crore | ₹80 crore | No |
| Set B ₹350 crore and Set C ₹420 crore | ₹70 crore | Yes |
| Set A ₹500 crore and Set B ₹350 crore | ₹150 crore | No |
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Reading the Example
Fair value = (₹350 crore + ₹420 crore) ÷ 2 = ₹385 crore. The average of all three (₹423.3 crore) is wrong, and so is simply adopting the third set's ₹420 crore. Liquidation value uses the same rule, applied asset class by asset class.
The resolution professional shares the fair value, liquidation value and valuation reports with committee members only after resolution plans are received, against a confidentiality undertaking. Until then the resolution professional and the valuers keep both values confidential.
Valuation in Liquidation (Regulation 35, Liquidation Regulations)
| Point | Rule |
|---|---|
| Starting point | Where CIRP valuation was done under regulation 35, the liquidator uses the average of those estimates |
| Fresh valuation | If not covered, or the committee thinks fresh valuation is needed: two registered valuers within 7 days of the liquidation commencement date |
| Value adopted | Average of the two estimates of realisable value |
| 25% deviation | If an asset class differs by 25% from the CIRP valuation, the valuers explain why at a meeting with the committee |
| Who cannot be appointed | A relative of the liquidator, a related party of the corporate debtor, its auditor in the five years before the insolvency commencement date, or a partner or director of the liquidator's insolvency professional entity |
How the Valuation Examination Tests This
Valuation under the IBC sits in the law modules of both papers, and the SFA syllabus names IBBI's IBC valuation guidelines and the coordinating valuer expressly.
- check_circleTwo sets, not two valuers: older study material describes the pre-2026 rule. The exam reads the regulations as on 30 June 2026.
- check_circleThe 47th day: within 7 days of appointment but no later than day 47 from the insolvency commencement date.
- check_circleTwo closest, not all: averaging all three estimates is the standard wrong option.
- check_circleThe 25% trigger now covers fair value of the corporate debtor or liquidation value. Before 2026 it was measured on liquidation value in an asset class.
FAQs
What is the difference between fair value and liquidation value under IBC?expand_more
Fair value is the realisable value of the corporate debtor in an arm's length exchange after proper marketing, including synergies. Liquidation value is what its assets would realise if it were liquidated. Both are measured on the insolvency commencement date.
How many registered valuers are appointed in CIRP?expand_more
Two sets, each with one registered valuer per asset class, appointed within 7 days of the resolution professional's appointment and by day 47. An MSME gets one set unless the committee decides on two. A third set may follow if estimates differ by 25% or more.
Who is a coordinating valuer?expand_more
The valuer in each set whom the resolution professional, in consultation with the committee of creditors, designates to compute the fair value of the corporate debtor as a whole from the set's asset-class valuations.
Next steps
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