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Valuation under Insolvency & Bankruptcy code

The Insolvency and Bankruptcy Code, 2016 (i.e. the Code) is making far-reaching changes in the business scenario of the country by overhauling the existing corporate insolvency and liquidation framework. The Code envisions a holistic remedy for insolvent corporate entities –instead of allowing individual creditors to take their bites from the assets of the corporate debtor.

A committee of creditors consisting of financial creditors of the corporate debtor decides on whether the issue of insolvency of the entity may be resolved or the entity should be liquidated. If the attempts to resolve the insolvency of the corporate debtor fail, the entity is taken into the stage of liquidation.

As per the Code the resolution plan must provide for repayment of debts of operational creditors in such manner as may be specified by the Board which shall not be less that the amount to be paid to the operational creditors in the event of liquidation of the corporate debtor.

Regulation 35 (i) of the Code defines liquidation value as
“Liquidation value is the estimated realizable value of the assets of the corporate debtor if the corporate debtor were to be liquidated on the insolvency commencement date.”

Regulation 38 (i) mandates that the resolution plan shall identify the liquidation value due to operating creditors and liquidation value due to dissenting financial creditors.

RBSA`s Role in Liquidation Valuation:
RBSA is a sector agnostic Valuation firm and holds leadership position in Valuation of Real estate, plant & machinery and all type of industrial assets.

RBSA also has unique technical expertise in valuation of specialised assets like mines, mining lease, other leases, oil rigs, ships, cargo vessels or other specialised assets which are specific to the Industry /company. Establishing a Liquidation value of such specialised asset is a challenge since these assets are not generally traded in open market.

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