Registered Valuer is the one of the newest professionals. Legal recognition under IBC was granted by Circular No. IBBI/RV/019/2018 dated 17th October, 2018 of IBBI mandating that the valuations required under the Code or any of the regulations made thereunder shall be conducted by a registered valuer. The present article is devoted to the scope of works of Registered Valuer under IBC as below:
1. Role under CIRP:
Appointment:
Under Reg. 27 of IBBI (Insolvency Resolution Process of Corporate Persons) Regulations, 2016: The RP shall appoint two registered valuers to determine fair value and liquidation value of the corporate debtor.
The time limit of appointment is between 7 days of RP/IPR’s appointment till 47 days of commencement of CIRP.
Determination of Fair Value and Liquidation Value:
Under Reg. 35, Fair Value and Liquidation Value shall be computed in accordance with internationally accepted valuation standards. The registered valuer shall do physical verification of inventory and fixed assets of the corporate debtor before computation of valuation.
In case of two estimates are significantly different, the RP may appoint another registered valuer.
The average of two closest estimates of a value shall be considered the fair or liquidation value.
The registered valuer shall maintain confidentiality of such value
Assessment of value under avoidable transactions:
Under Section 46 (2) of the Code, the adjudicating authority may require a registered valuer to assess the evidence relating to the value of avoidable transactions.
2. Role under Liquidation:
(a) In case of voluntary liquidation under Section 59(3)(b)(ii) of the Code, the declaration of the directors of the company shall be submitted along with the valuation report of a registered valuer.
(b) In case of liquidation (other than voluntary liquidation), under Regulation 35 (2) situation, of IBBI (Liquidation Process) Reg, 2016, the liquidator shall appoint two registered valuers to determine the realisable value of the assets or business. The appointment shall be made within 7 days of the liquidation commencement date. The registered valuer shall first do physical verification of the assets of the CD.
3. Role under Fast Track Resolution:
Appointment: Under Reg. 26 of IBBI (Fast Track Insolvency Resolution Process of Corporate Persons) Regulation, 2017, the RP shall appoint one registered valuer to determine the fair value and the liquidation value of the corporate debtor.
Following persons shall not be appointed as registered valuer:
- A relative of the RP
- A related party of the CD
- An auditor of the CD in preceding 5 years of ICD
- A partner or director of the IPE
Fair Value and Liquidation Value: As per Reg. 34, the registered valuer shall prepare an estimate of the fair value and the liquidation value in accordance with internationally accepted valuation standards. The registered valuer shall first physically verify the inventory and fixed assets of the corporate debtor.
4. Determination of Fair Value in CIRP:
As per Regulation 2 (hb) of IBBI (Insolvency Resolution Process for Corporate Persons) Regulations, 2016, fair value
- means the estimated realizable value of the assets of the corporate debtor.
- The concept is further elaborated as if the assets are exchanged on the insolvency commencement date.
- The exchange will happen between a willing buyer and a willing seller in an arm’s length transaction after proper marketing.
- Both the parties must have acted knowledgeably, prudently and without compulsion.
- Fair value assumes the going concern concept of the business of the corporate debtor.
5. Determination of Liquidation Value in CIRP
As per the Regulation 2 (k) of the aforesaid Regulations, liquidation value means
- The estimated realizable value of the assets of the corporate debtor
- If the corporate debtor were to be liquidated on the insolvency commencement date.
- Liquidation value assumes that the business will cease to exist on the insolvency commencement date.
In case you have any concern or need any support in valuation/compliance, you may like to contact us. Abhinarayan Mishra, FCA, FCS, LL.B, IP, RV ; Managing Partner; KPAM & Associates, Chartered Accountants; +9910744992, ca.abhimishra@gmail.com
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