In the Insolvency and Bankruptcy Board of India’s exam for Registered Valuer for the Securities and Financial Asset class, Professional/Business Ethics and standards is a separate chapter for which 4 marks has been earmarked. For clearing this Registered Valuer exam of IBBI, one need to take a deep dive in the course contents of this chapter as it is very much relevant from the practical aspect of a valuation professional. Clarity in Business and Professional Ethics play a vital role in the functioning of a Valuation Professional.

This model code provides for eligibility, qualifications and registration of valuers. This also mentions about the valuation examination to be passed by a eligible professional to practise as a registered valuer. Application of valuation standards has also been made mandatory while conducting any valuation assignment. However till date no valuation standards has been prescribed by IBBI or Central Government. It has also been provided that until the valuation standards are notified or modified by the Central Government, a valuer shall make valuations as per- (a) internationally accepted valuation standards; (b)valuation standards adopted by any registered valuers organisation.

As per the valuation rules, it has been prescribed that the registered valuer may obtain inputs for his valuation report or get a separate valuation for an asset class conducted from another registered valuer, in which case he shall fully disclose the details of the inputs and the particulars etc. of the other registered valuer in his report and the liabilities against the resultant valuation, irrespective of the nature of inputs or valuation by the other registered valuer, shall remain of the first mentioned registered valuer. This implies that a registered valuer may obtain the assistance of any other valuer by relying upon the valuation being done by such other valuer, and the registered valuer has to mentioned about that fact in its valuation report also, however ultimate liability for the valuation being done is of that registered valuer who is actually signing the current report.

The registered valuer in its report shall state the following:- (a) background information of the asset being valued; (b) purpose of valuation and appointing authority; (c) identity of the valuer and any other experts involved in the valuation; (d) disclosure of valuer interest or conflict, if any; (e) date of appointment, valuation date and date of report; (f) inspections and/or investigations undertaken; (g) nature and sources of the information used or relied upon; (h) procedures adopted in carrying out the valuation and valuation standards followed; (i) restrictions on use of the report, if any; (j) major factors that were taken into account during the valuation; (k) conclusion; and (l) caveats, limitations and disclaimers to the extent they explain or elucidate the limitations faced by valuer, which shall not be for the purpose of limiting his responsibility for the valuation report.

These rules also talk about the model code of conduct for registered valuer which specifies about various characteristics of the registered valuer which he/she should follow while performing his/her duties as a registered valuer. After clearing the online examination conducted by National Institute of Securities Management, on behalf of the IBBI, the applicant has to file an application on form A in order to register himself as a valuer. In case the applicant is other than individual, i.e. is an partnership entity or a LLP, Form B has to be filed with IBBI in order to get registration as a valuer. One thing that needs to be noted that in case of  a firm applying for registration as a registered valuer, minimum three partners of such firm should be Registered valuers.

Apart from Registered Valuers, there is also a concept of Registered valuer Organisation which are the organisations registered with IBBI and are indulged in the Training, registration and other administrative work for registration work of Registered Valuers on behalf of IBBI. It has been prescribed in the rules that no person shall be eligible to be recognised as an registered valuers organisation unless it is a company registered under section 8 of the Companies Act, 2013 with share capital, and – (a) its sole object is to carry on the functions of a registered valuers organisation under the Companies Act, 2013; (b) it is not under the control of person(s) resident outside India, (c) not more than forty-nine per cent. of its share capital is held, directly or indirectly, by persons resident outside India; and (d) it is not a subsidiary of a body corporate through more than one layer and (e) itself, its promoters, its directors and persons holding more than ten percent. of its share capital are fit and proper persons.

A Registered valuer organisation is eligible to be registered as such if it has been registered under section 25 of the Companies Act, 1956 (1 of 1956) or section 8 of the Companies Act, 2013 (18 of 2013) with the sole object of dealing with matters relating to regulation of valuers of an asset class or asset classes and has in its bye laws the requirements specified in Annexure-III, (ii) It is a professional institute] established by an Act of Parliament enacted for the purpose of regulation of a profession; Provided that, subject to sub-rule (3), the following organisations may also be recognised as a registered valuers organisation for valuation of a specific asset class or asset classes, namely:- (a) an organisation registered as a society under the Societies Registration Act, 1860 (21 of 1860) or any relevant state law, or; (b) an organisation set up as a trust governed by the Indian Trust Act, 1882.

With regard to the Governing board of the Registered valuer Organisation (RVO), it should be kept in mind that the Governing Board shall have a minimum of two directors. 2. More than half of the directors shall be persons resident in India at the time of their appointment, and at all times during their tenure as directors. 3. Not more than one fourth of the directors shall be registered valuers. 4. More than half of the directors shall be independent directors at the time of their appointment, and at all times during their tenure as directors: Provided that no meeting of the Governing Board shall be held without the presence of at least one independent director. 5. An independent director shall be an individual – (a) who has expertise in the field of finance, law, management or valuation; (b) who is not a registered valuer; (c) who is not a shareholder of the registered valuers organisation; and (d) who fulfills the requirements under sub-section (6) of section 149 of the Companies Act, 2013.

In addition, a registered valuer registered under IBBI has to follow certain protocols and rules so as to maintain unbiased approach in his conduct. In this regard, a model code of conduct has been prescribed for the registered valuers. As per the Model code, it has been provided that a valuer shall, in the conduct of his/its business, follow high standards of integrity and fairness in all his/its dealings with his/its clients and other valuers. A valuer shall maintain integrity by being honest, straightforward, and forthright in all professional relationships. A valuer shall endeavour to ensure that he/it provides true and adequate information and shall not misrepresent any facts or situations. A valuer shall refrain from being involved in any action that would bring disrepute to the profession. A valuer shall keep public interest foremost while delivering his services.

It has also been laid down in the model code of conduct for the registered valuers that a valuer shall render at all times high standards of service, exercise due diligence, ensure proper care and exercise independent professional judgment. A valuer shall carry out professional services in accordance with the relevant technical and professional standards that may be specified from time to time. A valuer shall continuously maintain professional knowledge and skill to provide competent professional service based on up-to-date developments in practice, prevailing regulations/guidelines and techniques. In the preparation of a valuation report, the valuer shall not disclaim liability for his/its expertise or deny his/its duty of care, except to the extent that the assumptions are based on statements of fact provided by the company or its auditors or consultants or information available in public domain and not generated by the valuer. A valuer shall not carry out any instruction of the client insofar as they are incompatible with the requirements of integrity, objectivity and independence. A valuer shall clearly state to his client the services that he would be competent to provide and the services for which he would be relying on other valuers or professionals or for which the client can have a separate arrangement with other valuers.

The above brief about Professional/Business Ethics and standards is just an introduction. You have to study the various concepts related to Professional/Business Ethics and standards which includes model Code of Conduct under the Companies (Registered Valuers and Valuation) Rules, 2017: professional competence and due care, independence and disclosure of interest, confidentiality, information management, gifts and hospitality. Integrity and fairness, remuneration and costs, occupation, employability and restrictions, business ethics. Ethical considerations under terms of engagements: engagement letter, management representation, guidance on use of work of experts, independence and conflict of interest, quality review process of valuers, rights and responsibilities of valuers. A total of 4 Marks questions can be asked from this area in the IBBI Registered valuer Exam.

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