The Invisible Balance Sheet: Valuing Intellectual Property in Indian Startup Insolvency
Introduction : The Indian startup ecosystem is no longer confined to businesses whose principal assets can be identified on a balance sheet. By 31 March 2026, more than 2.23 lakh entities had been recognised as startups under Startup India. A significant part of the value of technology, biotechnology, software and consumer-facing ventures may instead lie in patents, source code, trademarks, proprietary technology, licences, customer relationships and brand recognition. When such a business enters insolvency, the question is therefore not simply how much its machinery or inventory is worth, but whether its intangible assets can be identified, preserved and valued in a manner that reflects their capacity to sustain the business.
The Insolvency and Bankruptcy Code, 2016 (IBC) is conceptually equipped to recognise this problem. Yet its valuation architecture was historically framed at a relatively high level of abstraction rather than around a dedicated methodology for different forms of intellectual property. This became more visible in 2025, when the Insolvency and Bankruptcy Board of India (IBBI) began reforming the valuation framework after identifying inconsistency and lack of uniformity in valuation practice. The recent adoption of International Valuation Standards (IVS) and detailed guidelines has strengthened the position, but has not eliminated the question of how an IP portfolio should actually be valued in a distressed market.
IP is already part of the insolvency estate
IBC does not treat intellectual property as legally invisible. Section 18 requires the interim resolution professional to take control and custody of assets over which the corporate debtor has ownership rights, expressly including intangible assets such as intellectual property. At liquidation, section 36 similarly includes intangible assets, including intellectual property, within the liquidation estate. Section 29 also requires the information memorandum to contain relevant information for formulation of a resolution plan and obliges prospective resolution applicants to protect the corporate debtor’s intellectual property to which they obtain access.
These provisions establish an important proposition, IP is an insolvency asset, not merely a background feature of the business. The difficulty begins after that proposition is accepted. A patent cannot be treated like plant and machinery because its value depends upon remaining legal life, enforceability, technological relevance, market exclusivity, competing technologies and future revenues. A trademark may derive value from reputation and customer association rather than the cost of creating the mark. Software may be valuable because of its code, but also because of users, licences and contracts.
The framework was built around the corporate debtor, not the IP portfolio
Under the CIRP framework, registered valuers determine fair value and liquidation value, while the Committee of Creditors uses valuation information in considering resolution plans. The system therefore requires credible values for the corporate debtor without historically prescribing an IBC-specific methodology for every intangible asset. The valuation reforms notified in 2026 have moved towards two sets of valuers and a coordinating valuer who integrates different asset-class estimates and their underlying synergies.
This matters because IP valuation is not merely an accounting exercise. A patent may have little liquidation value if its technology is obsolete but substantial going-concern value if a buyer can integrate it into its own products. A trademark may have limited standalone value while contributing materially to enterprise value through customer trust and distribution. The value of software may lie less in reproduction cost than in recurring revenue or the ecosystem built around it.
The Companies (Registered Valuers and Valuation) Rules, 2017 illustrate another structural issue. The formal asset classes for registered-valuer qualification have principally been land and building, plant and machinery, and securities or financial assets. IP therefore does not operate as a distinct mainstream asset-class discipline in the registration architecture.
That does not mean IP cannot be valued. ICAI Valuation Standard 302 provides a detailed framework for intangible assets and identifies market, income and cost approaches, including relief from royalty and multi-period excess earnings methods. The difficulty is that a methodology existing within the broader valuation profession does not by itself resolve how an IP-heavy corporate debtor should be assessed within a time-bound, creditor-driven insolvency process.
The regulatory response
The problem was not purely theoretical. The existence of an intangible asset does not automatically result in a reliable figure. A brand may generate value through licensing or future earnings even where the underlying business is distressed. A valuation which treats the absence of current operations as equivalent to an absence of all future economic value can therefore produce a very different result from a valuation that examines transferable rights, contractual arrangements and residual market potential.
IBBI’s valuation reform agenda subsequently recognised a broader problem. Its 2025 material noted that intangible elements such as brand equity, licences, regulatory approvals, contractual rights and customer relationships can represent a significant part of a corporate debtor’s economic worth, especially in technology-driven and service businesses. It also recognised that divergent assumptions and reporting practices can produce substantial variations in valuation outcomes.
The regulatory response followed in 2026. From 1 April 2026, IBBI notified the International Valuation Standards as the standards applicable to valuations conducted under the IBC and related regulations. This is significant because IVS contains a dedicated standard for intangible assets, IVS 210, which addresses the particular characteristics of intangibles and recognises market, income and cost approaches.
The June 2026 Guidelines went further. They require the coordinating valuer to consider the integrated business, expected future cash flows and both tangible and intangible assets. They expressly identify trademarks, copyrights, patents, proprietary technology, licences, customer relationships and goodwill among intangibles that may significantly influence enterprise value, and require the basis for their identification and valuation to be documented.
Conclusion
India’s insolvency framework has moved considerably since 2025. The IBC already places intellectual property within the insolvency estate, while the 2026 reforms require valuations under the Code to follow IVS and expressly require consideration of significant intangible assets in determining enterprise value. The unresolved issue is not whether IP belongs in insolvency valuation. It does. The harder issue is whether the process consistently captures what makes IP valuable.
For IP-rich startups, value can lie precisely in assets that are difficult to see, separate and sell. A patent is valuable because of the monopoly it creates, software because of what it enables, a trademark because of the market relationship it carries. Insolvency law cannot protect that value by recognising IP in name alone. It must connect asset identification, legal ownership, specialised valuation and going-concern assessment into one coherent process. The 2026 reforms provide much of the institutional foundation. The next step is an IP-sensitive layer that makes that foundation workable for businesses whose most important assets are intangible.
Author: Amrita Pradhan in case of any queries please contact/write back to us via email to content@khuranaandkhurana.com or at Khurana & Khurana, Advocates and IP Attorney
References
Ministry of Commerce and Industry, Government of India, ‘Government recognizes more than 55,200 startups during FY 2025-26, highest ever in a single year since launch of Startup India initiative’ (Press Information Bureau, 17 April 2026) https://www.pib.gov.in/PressReleasePage.aspx?PRID=2253019®=48&lang=2
Insolvency and Bankruptcy Board of India, ‘Discussion Paper on Strengthening the Valuation Process under the Insolvency and Bankruptcy Code, 2016’ (14 November 2025) https://ibbi.gov.in/uploads/whatsnew/07994904562b27286b00c4def2cc79a0.pdf
Companies (Registered Valuers and Valuation) Rules 2017, Rule 4 and Annexure IV.
Institute of Chartered Accountants of India, ‘ICAI Valuation Standard 302: Intangible Assets’ (2018).
Insolvency and Bankruptcy Board of India, In the matter of Mr Kollupalli Swaroop, Registered Valuer, Order No IBBI/Valuation/Disc./31/2025, 27 November 2025.
Insolvency and Bankruptcy Board of India, ‘Strengthening Valuation for Credible Insolvency Outcomes’ (2025) https://ibbi.gov.in/uploads/public_comments/Discussion%20Paper%20on%20Strengthening%20the%20Valuation%20Process%20under%20the%20Insolvency%20and%20Bankruptcy%20Code,%202016%20.pdf
Insolvency and Bankruptcy Board of India, Circular No. IBBI/RV/93/2026, ‘Valuation Standards for the purpose of valuation conducted under the Insolvency and Bankruptcy Code, 2016’ (1 April 2026) https://ibbi.gov.in/uploads/legalframwork/b176b05d02cba50ae0d3279ff6ed553e.pdf
International Valuation Standards Council, ‘International Valuation Standards: IVS 210 Intangible Assets’ (effective 31 January 2025) https://saicawebprstorage.blob.core.windows.net/uploads/resources/IVS-effective-31-January-2025.pdf
Insolvency and Bankruptcy Board of India, Circular No IBBI/RV/103/2026, ‘Guidelines for Conducting Valuation under the Insolvency and Bankruptcy Code, 2016’ (15 June 2026) https://ibbi.gov.in/uploads/whatsnew/9d426e3d5c806a7a8f763103960345ea.pdf
Comments