UNIFORM VALUATION STANDARDS FOR IBC ASSETS IN THE WORKS
At present, internationally accepted valuation standards adopted by the Registered Valuers Organisation are used by the registered valuers for the purpose of arriving at the cost or value of assets such as plant and machinery and land and building.
In a move that will improve evaluation of assets under resolution, the government is working on bringing about a uniform set of valuation standards. The move, which is still at a nascent phase, is being spearheaded by the Insolvency and Bankruptcy Board of India (IBBI).
“Arriving at an objective valuation is extremely important from the perspective of the Insolvency and Bankruptcy Code. To this end, the IBBI is looking to work out valuation guidelines that can be used for these cases and later for other purposes also,” said a person familiar with the development.
At present, internationally accepted valuation standards adopted by the Registered Valuers Organisation are used by the registered valuers for the purpose of arriving at the cost or value of assets such as plant and machinery and land and building. However, it is felt that there is a need for having valuation guidelines in the Indian context to ensure more objectivity and uniformity.
“The valuation guidelines would be worked out within the overall ambit of the international valuation standards of the International Valuation Standards Council. These would not be in the nature of a mathematical formula. Rather, they would attempt to be a matrix of circumstances and options to be used to arrive at the best valuation of assets,” said the source.
It is expected that the IBBI is likely to work with the Registered Valuers Organisations, who would have more technical knowhow as well as manpower to chalk out the guidelines. RVOs are self-regulating professional entities that work as front line regulators for valuation professionals.
“The proposal on how to go about the valuation standards is still under discussion and it will require some time before a concrete plan of action is worked out,” said a second source. The move, once it fructifies, is expected to reduce subjectivity in valuation of assets under IBC. Subsequently, these can also be used for valuations for sale of public sector assets such as ports.
Experts point out that valuation is a very important part of the corporate insolvency resolution process and plays a key role in ensuring a fair price for company under resolution. Fair value and liquidation value requirements are prescribed under the IBBI (Insolvency Resolution Process for Corporate Persons) Regulations, 2016.
“Valuation standards would be very useful. Anything with multiple interpretations can create confusion and is open for manipulation. There should always be standards to ensure uniformity,” said Pavan Vijay, Founder, Corporate Professionals.
A number of advanced economies such as the UK, the US, Canada and Singapore already have their own valuation standards.
