The ministry of company affairs (MoCA) has recommended stringent guidelines for valuation professionals that are exclusively allowed to undertake the valuation of businesses, shares, brands and the like after being recognised by a proposed council.
A concept paper on a Valuation Professionals Bill, floated by the ministry (and reported by FE on Wednesday), stipulates stiff penalties for violation of the guidelines, including fines up to Rs 5 lakh and disbarment.
The penalties would be for professional misconduct in areas like due diligence, disclosure of confidential information, failure to report material misstatement and gross negligence. These areas have been defined in two schedules in the concept paper and cover a variety of situations and circumstances under which a valuation professional can attract censure.
Disclosure of information acquired in the course of professional engagement with any person other than a client or certifying a valuation report not made by him or by a partner would also be considered misconduct.
A valuer cannot express an opinion about a business or enterprise in which he, his firm or limited liability partnership may have substantial interest. Failure to draw attention to any material departure from generally accepted valuation procedures or failure to keep client money other than fees, remuneration, or money to be expended, in a separate banking account would also be deemed misconduct.
Many in the industry, however, feel it would be difficult to implement such guidelines. You cant standardise judgement call issues on valuations because all valuations tend to be different, says Gaurav Khungar, executive director (corporate finance), KPMG India.