(By Mr. Vinay K Goel, Hony General Secretary, Institution of Valuers (IOV) and MD & CEO, IOV Registered Valuers Foundation (IOV-RVF)
A market economy needs valuations of assets to facilitate a variety of transactions under different statutes and authorities in India and for different purposes and prescribe the manner of such valuation. A valuer thus has an important responsibility. The valuer must possess the required capability and integrity for the job.
This calls for an institutional framework for regulation and development of profession of valuers and therefore the concept of Registered Valuers has been brought by section 247 of the Companies Act, 2013 and the Companies (Registered Valuers & Valuation) Rules, 2017 made there under, with the objective to:
- regulate the practice of Valuation in India.
- instill independence and professionalism in the field of valuation of assets.
- standardize the valuation in line with international standards.
With effect from 1st February 2019, every valuation required under the Insolvency & Bankruptcy Code, 2016 (“Code”) or any of the regulations made there under is required to be conducted by a ‘Registered Valuer’ registered for the respective asset class, that is, a valuer registered with the IBBI under the said Rules. No insolvency professional shall appoint a person other than a Registered Valuer to conduct any valuation under the Code or any of the regulations made there under.
It has also been clarified that conduct of valuation by any person under any other law shall not be affected by virtue of coming into effect of these rules unless the relevant other laws or other regulatory bodies require valuation by such person in accordance with the said rules in which case said rules shall apply for such valuation also from the date specified under the laws or by the regulatory bodies.
In the light of the myriad uses of valuation under the Companies Act, 2013 and the IBC, 2016, the integrity, impartiality, truthfulness and credibility of the valuation process followed in India is absolutely essential to the effective working of these laws and to incoming FDI in India which is based on such valuation.
Challenges being faced by the Registered Valuers in getting the Valuation Assignments:
- Unawareness amongst the Registered Valuers to approach the stakeholders for valuation assignments.
- Clarity and transparency are required in the procedure adopted by the Insolvency Professionals (IPs) for the appointment of valuers to carry out the valuation assignments.
- Appointment of the Registered Valuers by the IPs is mainly based on lowest fees quoted by the Registered Valuers, ignoring other important criteria like competency of the valuer, the level of expertise required for the valuation of specific assets, number of man hours required, logistics etc.
- Consolidated fee quote is being asked for valuation assignments for all the 3 asset classes. And since most of the Registered Valuers are registered for one or two asset class/es only and accepting such assignment requires involvement of other Valuers registered for another asset classes. Which means such Registered Valuers will be liable and accountable for the Valuation reports of other experts involved as well and this is a risky option for them.
- Lack of availability of data and information, required for quoting the fees as well as for valuation, from the Insolvency Professionals.
The Valuation fraternity has the responsibility to nurture the valuation profession and make it most valued and respected profession. Actions and conduct of Registered Valuers require self-regulation, accepting collective responsibility to build and preserve the reputation and the future of the Valuation profession. Thus, immense care is to be observed while taking up the valuation engagements.
Suggestive measures to overcome the above challenges:
A. For Registered Valuers:
- By undertaking valuation assignments for which there is appropriate competence and quote the fees for such assignments accordingly.
- By not accepting assignments that include the reporting of predetermined opinions and conclusions.
- By maintaining complete independence in the professional relationships and conducting the valuations independent of external influence.
- By not indulging in mandate snatching or offering “convenience valuations” in order to cater to the client’s needs.
- By consistently and conscientiously following the code of conduct while taking up the engagements, while carrying out valuation and at the time of reporting also.
- By taking conscious and responsible efforts to build the Profession for the valuer’s fraternity as a whole.
B. For Regulatory Bodies:
- By providing a framework for centralised and transparent system of assignment of valuation engagements to the Registered Valuers by the Stakeholders, through fair means of competition.
- By providing broad outlines on the computation of fees to be charged for the assignments based on certain criteria such as:
- of man hours to be spent for the specific valuation assignment by the Valuer and his team.
- Number and expertise of team members required for the specific valuation assignment.
- Expenditure to be incurred on logistics
- By providing a procedure for rational distribution of assignments to the Registered Valuers.
- By fixing maximum number of valuations to be carried by the Registered Valuers in a quarter or a year.
- Rotation basis to be implemented for the allotment of the valuation assignments for the RVs.
C. For Registered Valuer Organisations (RVOs):
- By creating awareness amongst the Registered Valuers for their responsibilities and accountability for the specific assignments being carried by them through various interactive sessions, seminars, workshops to be conducted under Continuing Education Programs (CEP).
- By scrutinising the valuation reports of the Registered Valuers and pay random visits to the Registered Valuers to understand and improve the procedure being followed by them for carrying out the Valuation Assignments.
- By creating awareness on modalities of getting the valuation assignments through CEPs.
- By conducting interactive programs for Registered Valuers with the stakeholders through CEPs.
There is immense opportunity for growth in this industry. Professionals are being exposed to a wider variety of opportunities now by enhancing their professional and career growth chances. The Indian business valuation industry is bound to grow significantly, especially domestically.