Discussions

Many entrepreneurs, investors, insolvency professionals, and financial advisors often struggle to understand the combined impact of IBC valuation and inbound investment under FEMA. Both areas involve intense regulatory scrutiny, and incorrect interpretation can lead to delays, penalties, or rejection of critical transactions.
This forum discussion aims to bring clarity to these two highly connected financial domains that businesses commonly deal with.

1. What Makes IBC Valuation So Crucial During Insolvency?
   When a company enters the resolution stage, IBC valuation becomes the backbone of the insolvency process. Accurate valuation helps determine:
   The fair market value of assets

The liquidation value of the company

The correct treatment of creditors

Investor interest and resolution plan feasibility

A transparent and compliant bidding process

Professionals conducting IBC valuation must follow strict guidelines under the Insolvency and Bankruptcy Code, using approved valuation methodologies. This ensures unbiased decision-making for CoC, insolvency professionals, and potential resolution applicants.
Without proper IBC valuation, the entire insolvency process can become legally weak or financially disputed.

2. How Does Inbound Investment Under FEMA Affect Foreign Investors?
   Foreign investors entering India must comply with RBI and FEMA provisions related to inbound investment under FEMA. Every investment FDI, share transfer, convertible instruments, rights issues, or subscription must meet:
   Sectoral caps

Entry route conditions (automatic or approval)

Pricing guidelines

Reporting timelines

KYC & due-diligence norms

Understanding inbound investment under FEMA is essential for foreign companies, NRIs, startups receiving overseas funding, and Indian firms issuing shares to foreign entities. Even delays in filing forms like FC-GPR, FC-TRS, or FLA return can result in penalties.

3. How Are IBC Valuation and Inbound Investment Under FEMA Connected?
   Many companies undergoing insolvency attract foreign bidders, especially distressed-asset investors. In such cases:
   The value determined during IBC valuation becomes the basis for negotiation

FEMA rules apply to foreign resolution applicants

Pricing guidelines must align with insolvency-based valuation

Funding structures for acquisition must meet FEMA norms

Foreign investors often ask whether the acquisition of distressed assets is allowed under inbound investment under FEMA. The answer is yes however, compliance must be strictly followed.

4. Why Do Businesses Seek Professional Assistance?
   Given the complexity of IBC valuation and inbound investment under FEMA, companies rely on expert advisory support to ensure precision, compliance, and smooth execution. Missteps in either domain can delay transactions or attract regulatory action.