Govt to strengthen regulatory regime for distressed co valuers
New Delhi: The regulatory framework for professionals valuing the assets of distressed companies will continue to be strengthened as a decision on whether to salvage an insolvent business or to liquidate it depends on the valuation of its assets, the ministry of corporate affairs said in its latest monthly update. The ministry said that the work of valuers is significant given that any wrong outcome of debt resolution—salvaging a company with no chance of survival or liquidating a potentially viable one—have disastrous consequences for the economy.
“Given the importance of the profession in insolvency resolution process, the ministry of corporate affairs will only further strengthen the regulatory regime pertaining to the regulation and development of the registered valuers profession," the ministry said. It also explained that Insolvency and Bankruptcy Board of India (IBBI) requires every valuation exercise made under bankruptcy code has to be done by a registered valuer.
Also, from 1 February 2019, appointing any person other than a registered valuer for assessing the worth of an enterprise under the Code is made illegal and any fee paid in such cases will not be taken as the debt resolution or liquidation cost. The ministry’s update explained citing regulations that certain persons are prohibited from acing as valuers.
These include relatives of resolution professionals overseeing the corporate turnaround process, relatives of the company in distress, auditors of the bankrupt business and partners or directors of the entity which the resolution professional is part of. The idea is to ensure the sanctity of the valuation report which helps creditors, investors and the tribunal to decide on the best possible course of
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