Regulation 35: Valuation of Assets or Business Intended to Be Sold

Once a company enters liquidation under the Insolvency and Bankruptcy Code, the resolution process is over and the liquidator's job becomes selling the corporate debtor, its business or its assets to pay creditors. Before anything is sold, the liquidator needs to know what it is worth. Regulation 35 of the IBBI (Liquidation Process) Regulations, 2016 sets out how that valuation is done.

It is worth being precise about which Regulation 35 this is. The CIRP Regulations also have a Regulation 35, titled "Fair value and Liquidation value," which applies earlier, during the resolution process before liquidation is ordered. This piece is about the separate Regulation 35 in the Liquidation Process Regulations, which governs the valuation used once the company is actually being wound up and its assets or business are being sold.

When a Fresh Valuation Is Needed

A CIRP valuation may already exist from the resolution process. Regulation 35 addresses what happens where that valuation is not available, or where the liquidator, after consulting the stakeholders' consultation committee, forms the view that a fresh valuation is required given the circumstances at the liquidation stage. In that situation, the liquidator appoints two registered valuers to determine the realisable value of the assets or the business, covering the various modes of sale contemplated elsewhere in the regulations, such as a sale of the business as a going concern, a slump sale, or a sale of assets in parcels or as a set.

Who Can Be Appointed

The regulation bars certain people from being appointed as valuers for this purpose, reflecting the same independence principle that runs through the Code generally: a person too closely connected to the corporate debtor, the resolution professional, or the liquidator should not be the one putting a number on the assets being sold. The precise categories of disqualified persons are listed in the regulation itself and should be checked against the current text before relying on them.

How the Value Is Actually Arrived At

Where two valuers are appointed, the average of their estimates is treated as the value of the assets. This mirrors the two-valuer, average-based approach used earlier in the CIRP valuation regulation, and it is meant to reduce the influence of a single valuer's judgment on a number that materially affects creditor recovery.

The Check Against the Earlier CIRP Valuation

One of the more distinctive features of this regulation is a built-in reconciliation mechanism. Where the valuation of an asset class under Regulation 35 of the Liquidation Process Regulations differs by twenty-five percent or more from the valuation of the same asset class done earlier under Regulation 35 of the CIRP Regulations, the liquidator must facilitate a meeting where the registered valuers explain the reason for the difference to the consultation committee. In other words, a large swing between the resolution-stage valuation and the liquidation-stage valuation cannot simply be filed away. It has to be explained to the people whose recovery depends on it.

This matters because the gap between the two numbers is not automatically a sign of error. A business can genuinely lose value between the start of CIRP and the point of liquidation, through deterioration of assets, loss of customers or employees, or simply the passage of time. The regulation does not stop that gap from existing. It requires it to be accounted for openly rather than left unexplained.

Why This Matters Beyond Compliance

For creditors, this valuation is the benchmark against which any offer for the assets or the business is judged, and unusually low recoveries are more likely to be scrutinised where the underlying valuation itself looks weak or unexplained. For a registered valuer, the standard being applied is realisable value at the liquidation stage, not the fair value or going-concern value that might have been relevant earlier in CIRP, and conflating the two produces a number that answers the wrong question for this specific stage of the process.

Regulation 35 of the Liquidation Process Regulations exists to make sure that assets sold in liquidation are sold against a properly determined, independently arrived-at value, and that any material difference from an earlier CIRP valuation is explained rather than quietly absorbed. Given how much regulatory detail sits in the specific sub-regulations, including timelines, disqualification criteria and the exact deviation trigger, this is one area where the current regulation text and any recent amendments should be checked directly before relying on the specifics.