· Change in regulatory laws and policies:
To deal with the economical positions of various firms and companies, India reached the pre-IBC era by suspending the Insolvency and Bankruptcy Code 2016 for one year. This arrow hit many aspects. On one side it saved the corporates and their potential future, and on the other hand, it reduced the burden of the court from the expected cases that might be filed by triggered creditors against corporate debtors in the pandemic. This socio-economic measure is seen as the best move to save the economy from collapsing, but it put forth various challenges to valuation firms in India.
· Classifying wilful defaulter and defaulter in the pandemic:
According to the ordinance issued for IBC suspension, every default in the stated period seems to appear because of the pandemic crisis. However, it’s not true in any sense. Registered valuers in India see it as an arbitrary move because there may be many defaulters due to other reasons too and they may get benefitted unnecessarily in this suspension.
Loans for the Covid-19 period are specifically excluded from the definition of default. Registered valuers in India find this action not good enough for the voluntary insolvency resolution. Experts say that the Ministry has painted all defaults with the same brush. And that’s why many wilful defaulters will enjoy protection while volunteers will not be able to file insolvency cases.
· Bring afresh restructure plan:
Post COVID-19 lockdown, the valuation has been dropped so dramatically that it may not match the valuation done in the pre-COVID19 period. So, it is almost impossible to get bids on the pre-valuation reports because nobody is going to pay more than the current values. So, working on a new restructuring plan syncing to the existing laws and policies may prove burdensome to the valuation firms in India with lesser clarity.
Amid all these, it is quite difficult for valuation firms in India to recognize the real values of the companies or organisations. Many of them may get under-valued or some may be over-valued as the true classification is not possible during the period.
Various studies show that the further suspension of IBC may lead to riskier behaviour among firms. The real adverse effect of the move of IBC in the economic and business disruption due to the current pandemic in India will be seen after its revoke too. The infusion of funds will be reduced and resultantly, India will witness negative or slower economic growth.