June 08, 2026 | Corporate & CommercialThe 2026 valuation reforms mark a significant shift in India's insolvency framework for MSMEs. By adopting a more proportionate approach, the amendments seek to reduce costs, minimize delays, and improve outcomes for stakeholders.
The Insolvency and Bankruptcy Code was introduced to help businesses resolve debt and start fresh. For large corporations, it has largely delivered on that. But over time, the process itself became disproportionately burdensome for small businesses. An MSME going through insolvency was expected to follow the same rules as a large corporation, just with smaller assets and much less money to spend on it all. Same compliance, same number of valuers, same documentation, and same cost.
The requirement to appoint two registered valuers has been part of the process uniformly for all corporate debtors. Over the years, the requirement evolved. The valuation requirement was tightened to "two sets of registered valuers" in early 2026, where each set had one valuer per asset class and a designated coordinating valuer. Notably, just months before the present amendment, the valuation requirement had become more structured and heavier.
IBBI had flagged the problem as early as June 2024 when it released a discussion paper that proposed a single-valuer default for MSMEs and companies with assets under INR 1,000 crore. The rationale was clear: it added both cost and time to a process that was already struggling with delays. May 2026 amendments are the result of that thinking, finalized after consultation. Thus, it was not a sudden move but a correction that followed about a year of consultation.
On May 19, 2026, IBBI amended three regulations, namely the CIRP Regulation, the Pre-Packaged Insolvency Resolution Process Regulation, and the Liquidation Process Regulation. All three came into force in May 2026. Individually, each amendment looks like a minor technical change. However, together, they addressed this issue and marked a clear policy shift toward making the process proportionate for smaller businesses.
These three amendments carry the same idea, applied at three different stages of insolvency.
At the CIRP stage, the amendment inserts a proviso into Regulation 27. For a corporate debtor classified as an MSME, the resolution professional now appoints one set of registered valuers by default, instead of two. The committee retains the power to mandate two sets, but only if it records the reasons in writing before doing so.
At the pre-pack stage, which is a process available exclusively to MSMEs, the changes came in two parts across 2026. The February amendment restructured the valuation framework. It built architecture. Then the May amendment worked within that architecture and made two further changes: it reduced the default from two sets to one set, and it introduced the hard three-day deadline for appointing valuers from the date of the RP's appointment.
At the liquidation stage, Regulation 35 now provides that for an MSME, the liquidator shall appoint one registered valuer for each asset class. Previously, two valuers per asset class were the standard for all corporate debtors. The liquidator may still appoint two valuers, but only after consultation with the consultation committee and for reasons to be recorded in writing. This is perhaps the most consequential of the three changes. In liquidation, there is no resolution plan, no ongoing concern value to preserve. Whatever is recovered from selling assets goes to creditors. Every rupee spent on an additional valuer directly reduces the amount available to creditors.
What ties all three amendments together is not just the subject matter but also the same structure. Each of them sets one set as the default and two sets as an exception only through a written decision by the committee or consultation committee.
That written reason requirement serves a substantive purpose and is not merely a formality. It means that appointing two sets of valuers for an MSME requires someone to place on record why the complexity of that specific case justifies the additional cost and time. That acts as a meaningful check against routine or unjustified dual valuations. . Without it, two sets would simply continue to be practiced regardless of what the regulation says.
The cost impact is also real. Registered valuer fees for two sets of valuers can run into lakhs of rupees, depending on the case. For an MSME with total assets around INR 8–10 crore, that is a significant amount. That money comes out of the estate, meaning it directly reduces what creditors get back. Beyond fees, two sets also mean separate reports, possibly divergent estimates, and if the estimates differ by twenty-five percent or more, a mandatory third valuer may have to be appointed. That entire chain adds weeks to timelines that are already under pressure.
These are regulatory amendments and not legislation. They can be revised if they do not work as intended. Further, the framework is now proportionate on paper, but the real test is in practice. IBBI identified a genuine concern, consulted on it for about a year and responded through targeted regulatory amendments. Whether it translates into faster, cheaper, and better outcomes for MSMEs in insolvency will only show in practice over the next year or two.
Will resolution professionals comply with the three-day timeline for appointing valuers? Will committees use the written-reasons requirement substantively, rather than as a procedural formality? Will single-set valuations withstand scrutiny before the adjudicating authority, or will they generate fresh disputes and delays?
What can be said is that the IBBI identified a real problem, consulted on it for over a year, and corrected it in the right direction. Now, whether it translates into faster, cheaper, and better outcomes for MSMEs in insolvency will only show in practice over the next year or two.
Immediate effects include lower costs because single-set valuations reduce valuer fees, preserving more of the estate for creditors. Faster timelines are possible because fewer valuers and the three-day appointment deadline in pre-pack can shorten valuation timelines. Fewer procedural complications happen because reducing the number of reports lowers the risk of divergent estimates triggering additional valuation steps.
The change in liquidation is particularly consequential because there is no resolution plan. Whatever is recovered from asset sales goes directly to creditors. Every rupee saved on valuation fees increases distributions to creditors.
As the insolvency framework for MSMEs continues to evolve, India Law Offices advises resolution professionals, creditors, and corporate debtors on navigating regulatory changes, valuation requirements, and procedural compliance under the Insolvency and Bankruptcy Code. Our team assists stakeholders at every stage of the insolvency process, helping them address legal and practical challenges while pursuing efficient and commercially viable outcomes.
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