DISCUSSIONS ON LIMITATIONS/

DISCLOSURES/ DEPARTURES –
THE NEED OF THE HOUR

KS VENKATAKRISHNAN

CEP CHENNAI, CVSRTA RVA - K S Venkatakrishanan 30.06.2019

WHO IS A VALUER?
WHY IS HE REQUIRED?
Voice of reasoning

“An expert in the analysis of a specific asset

providing logical conclusions keeping in mind the
rights, interest in the property. He needs to interpret
the physical, socio, economic and Legal factors into
an monetary figure. He needs to imagine, assume,
perceive, absorb and then bring out the facts in a
proper shape which justify his thought process. “

CEP CHENNAI, CVSRTA RVA - K S Venkatakrishanan 30.06.2019

 FIDUCIARY RESPONSIBILITY
What is it?

An individual in whom another has placed the utmost trust

and confidence to manage and protect property or money.
Characteristically, the fiduciary has greater knowledge and
expertise about the matters being handled. A fiduciary is
held to a standard of conduct and trust above that of a
stranger or of a casual business person.
What is in it for us?
A fiduciary responsibility of a valuer is to safe guard the
trust and confidence of the party commissioning the
valuation. This has to be done by exercising his duty
towards the profession, with full disclosure, diligence and
with a sense of accounting to the principal.
CEP CHENNAI, CVSRTA RVA - K S Venkatakrishanan 30.06.2019
VALUATION IS AN ART OR SCIENCE ?
WHAT IS AN ART PORTION OF IT AND A
SCIENCE PORTION
ART SCIENCE

INTERPRETATION OF DATA COLLECTION (

ASSIMILATED DATA INFORMATION ON
ASSESSMENT OF RISKS COMPARABLES)

APPROPRIATE STATISTICAL DATA

COMMUNICATION AND MATHEMATICAL MODELS
RECORDING OF FACTS GPS COORDINATES –
LATITUDE AND LONGITUDE

CEP CHENNAI, CVSRTA RVA - K S Venkatakrishanan 30.06.2019

CLASSIFY THE ENTIRE GAMUT OF AN
VALUATION EXERCISE INTO
FOLLOWING PARTS
PART I : PRE ENGAGEMENT DISCLOSURE
PART II : ON THE ACCEPTANCE OF THE
ASSIGNMENT
PART III : DURING THE EXECUTION OF THE
ASSIGNMENT
PART IV : COMPLIANCES POST THE SUBMISSION
OF THE REPORT

CEP CHENNAI, CVSRTA RVA - K S Venkatakrishanan 30.06.2019

 PART I : PRE ENGAGEMENT DISCLOSURE
WHETHER HE IS SUITABLY QUALIFIED TO HANDLE THE ASSIGNMENT –
APPROPRIATE ACADEMIC/ PROFESSIONAL QUALIFICATIONS, MEMBERSHIP
OF A PROFESSIONAL BODY DEMONSTRATING A COMMITMENT TO ETHICAL
STANDARDS,SUFFICIENT KNOWLEDE OF THE MARKET HE OPERATES.
WHEREVER ADVICE FROM SUBJECT EXPERT IS REQUIRED &SOUGHT, TO BE
DISCLOSED TO THE CLIENT.
ANNEXURE – 1 MODEL CODE OF CONDUCT (RULE 19) FOR REGISTERED
VALUER.
VALUER TO DISCLOSE IF HE HAS UNDERTAKEN VALUATION ASSIGNMENT
EARLIER OR THERE HAS BEEN A PRIOR ENGAGEMENT IN AN UNCONNECTED
TRANSACTION, THE VALUER SHALL DECLARE SUCH ASSOCIATION WITH THE
COMPANY DURING THE PAST FIVE YEARS. HOWEVER IF HE FEELS THAT
THERE COULD BE ANY POSSIBLE CONFLICT OF INTEREST ONACCOUNT OF
SUCH ASSOCIATION HE MUST DECLINE THE ASSIGNMENT.

CEP CHENNAI, CVSRTA RVA - K S Venkatakrishanan 30.06.2019

 SCOPE OF WORK IS TO BE ESTABLISHED CLEARLY
BETWEEN THE PARTIES PRIOR TO THE VALUER
BEGINNING THE ASSIGNMENT. (For ex: Operating
lease/Financial lease, impairment of assets,
componentization etc.)
DATE OF VALUATION : OBTAIN IN WRITING
( FOR EX : WHETHER IT IS ON THE INSOLVENCY
COMMENCEMENT DATE IN CASES OF IBC VALUATION)
IF THE VALUATION IS TO BE DONE UNDER COMPANIES ACT,
2013 CLEARLY MENTION UNDER WHICH SECTION OF THE
ACT SUCH VALUATION IS REQUIRED AFTER APPROPRIATE
DISCUSSION WITH THE MANAGEMENT.
CEP CHENNAI, CVSRTA RVA - K S Venkatakrishanan 30.06.2019
PART II: ON THE ACCEPTANCE
OF THE ASSIGNMENT
OBTAIN AN ENGAGEMENT LETTER CLEARLY MENTIONING THE PURPOSE OF THE
VALUATION EXERCISE , THE SCOPE OF WORK WITH DISTINCT BASIS OF VALUE
INCLUDING ASSETS TO BE VALUED.
REMEMBER THAT ENGAGEMENT LETTER IS A CONTRACT AND ENSURE ALL THE
PARAMETERS OF SUCH CONTRACT ARE IN PLACE. (TERMS OF CONTRACT,
PROFESSIONAL FEE, TIMELINE INCLUDING SCOPE OF WORK).
IN THE EVENT THE ENGAGEMENT LETTER IS NOT ISSUED BY THE CLIENT IT IS IN
THE INTEREST OF THE VALUER TO PREPARE AN ENGAGEMENT LETTER AND GET
IT DULY SIGNED BY THE CLIENT.
( VALUERS ARE RESPONSIBLE FOR COMMUNICATING THE SCOPE OF WORK TO
THEIR CLIENT)

CEP CHENNAI, CVSRTA RVA - K S Venkatakrishanan 30.06.2019

 PART III : DURING THE EXECUTION
OF THE ASSIGNMENT
LIMITATIONS
Dictionary meaning : the act of limiting or controlling something; a
condition that puts a limit on something
Something that limits: restraints
Examples :
Depending upon the nature and extent of the valuer‟s work any
limitations thereon to be specified. Where there has been a restriction
on the internal inspection or measurement , enquiry or analysis during
the valuation assignment the same must be identified and disclosed . If
relevant information is not available because the conditions of the
assignment restrict the investigation, these restrictions and any
necessary assumptions or special assumptions made as a result of
restriction must be mentioned. A limitation specified in the report is a
part of the disclosure statement
CEP CHENNAI, CVSRTA RVA - K S Venkatakrishanan 30.06.2019
CONTINUED…

Restrictions on use, distribution and publication of the

report must be specified. The restrictions must be
recorded in by a statement that a report has been
prepared for a specific purpose and not to be used for
other purposes. Also where it is necessary or desirable
to restrict the use of the valuation or those relying on it,
the intended users and restrictions must be clearly
communicated.
Please note : all limitations are to be recorded only
after the valuer inspite of his judicious efforts is unable
to obtain the data. However, a valuer shall not absolve
his responsibility in his report.
CEP CHENNAI, CVSRTA RVA - K S Venkatakrishanan 30.06.2019
CONTINUED…

Assumptions :
A supposition taken to be true. It involves facts,
conditions or situations affecting the subject of,
or approach to, a valuation that, by agreement, do
not need to be verified by the valuer as part of the
valuation process. Typically, an assumption is
made where specific investigation by the valuer
is not required to prove that something is true.

CEP CHENNAI, CVSRTA RVA - K S Venkatakrishanan 30.06.2019

CONTINUED…

In the preparation of a valuation report, the valuer should not disclaim liability for
his/its expertise or deny his/its duty of care, except to the extent that the
assumptions are statements of fact provided by the company and not generated
by the valuer.

CEP CHENNAI, CVSRTA RVA - K S Venkatakrishanan 30.06.2019

CONTINUED…

Special assumptions :
Where an assumption is made that assumes facts
that differ from those existing at the date of
valuation, it becomes a special assumption . Special
assumptions are often used to illustrate the effect of
possible changes on the value of the asset. They
are designated as “special” so as to highlight to a
valuation user that the valuation conclusion is
contingent upon a change in current circumstances
or that it reflects a view that would not be taken by
market participants generally on the valuation date.
CEP CHENNAI, CVSRTA RVA - K S Venkatakrishanan 30.06.2019
CONTINUED…
Departures :
A „departure‟ is a circumstance where specific
legislative, regulatory or other authoritative
requirements must be followed that may differ from the
some of the requirements of the standard.
Depending upon the purpose and jurisdiction of the
valuation, the valuer to state the departure provisions so
as to comply with legislative, regulatory and other
authoritative requirements.
Where there is a need to depart from the standards clear
statement to that effect to specified in the terms of the
engagement and as well as in the report.
CEP CHENNAI, CVSRTA RVA - K S Venkatakrishanan 30.06.2019
 CONTINUED…
Disclosures :
A disclosure is a statement which is to be made to
bring in transparency in the reporting. A disclosure
can be in any form in a report right from the appropriate
definition in the terms of engagement, scope of the
work, or special assumptions etc. The disclosure can
be in the form of a methodology used and the
underlying assumptions which could be sensitive to
the valuation analysis. If there are earlier involvement
in an assignment with the client the same has to be
disclosed to avoid conflict of interest.
CEP CHENNAI, CVSRTA RVA - K S Venkatakrishanan 30.06.2019
 CONTINUED…
Additional Disclosures :
If published references are considered the same to be
additionally disclosed with due verification before using
the same.

CEP CHENNAI, CVSRTA RVA - K S Venkatakrishanan 30.06.2019

CONTINUED…

CONFIDENTIALITY (REFER ANNEXURE -1 MODEL CODE

OF CONDUCT FOR REGISTERED VALUERS) :
VALUER SHALL NOT DIVULGE TO OTHER CLIENTS OR
ANY OTHER PARTY ANY CONFIDENTIAL INFORMATION
ABOUT SUBJECT COMPANY, WHICH HAS COME TO
HIS/ITS KNOWLEDGE WITHOUT PROPER AND SPECIFIC
AUTHORITY OR UNLESS THERE IS A LEGAL OR
PROFESSIONAL RIGHT OR DUTY TO DISCLOSE.

CEP CHENNAI, CVSRTA RVA - K S Venkatakrishanan 30.06.2019

PART IV : COMPLIANCES POST THE
SUBMISSION OF THE REPORT
KEEPING THE RECORDS OF THE WORK PERFORMED
DURING THE VALUATION PROCESS AND THE BASIS FOR THE
WORK FOR A MINIMUM PERIOD OF 3 YEARS POST THE
SUBMISSION OF THE REPORT OR TILL THE CASE IS
CLOSED. THIS WOULD ALSO INCLUDE THE REPORT.
ADDITIONAL SET OF REQUIREMENTS WOULD INCLUDE THE
COMPLIANCES AS REQUIRED BY THE REGISTERED VALUER
ORGANISATION, INTERNAL POLICIES OF PROCEDURES OF
FIRMS ( ISO ETC),
SOFTWARE PROTECTION SYSTEM ( PASSWORD
PROTECTION/ DATA STORAGE MECHANISM AGAINST DATA
THEFT)
CEP CHENNAI, CVSRTA RVA - K S Venkatakrishanan 30.06.2019
 CONTINUED…

CONFIDENTIALITY (REFER ANNEXURE -1

MODEL CODE OF CONDUCT FOR REGISTERED
VALUERS) : VALUER SHALL NOT DIVULGE TO
OTHER CLIENTS OR ANY OTHER PARTY ANY
CONFIDENTIAL INFORMATION ABOUT
SUBJECT COMPANY, WHICH HAS COME TO
HIS/ITS KNOWLEDGE WITHOUT PROPER AND
SPECIFIC AUTHORITY OR UNLESS THERE IS A
LEGAL OR PROFESSIONAL RIGHT OR DUTY
TO DISCLOSE.
CEP CHENNAI, CVSRTA RVA - K S Venkatakrishanan 30.06.2019
CONTINUED…

A VALUER SHALL NOT DEAL IN SECURITIES OF ANY

SUBJECT COMPANY AFTER ANY TIME WHEN HE/IT
FIRST BECOMES AWARE OF THE POSSIBILITY OF
HIS/ITS ASSOCIATION WITH THE VALUATION, AND IN
ACCORDANCE WITH THE SECURITIES AND EXCHANGE.
BOARD OF INDIA (PROHIBITION OF INSIDER TRADING)
REGULATIONS, 2015 OR TILL THE TIME THE VALUATION
REPORT BECOMES PUBLIC, WHICHEVER IS EARLIER.

CEP CHENNAI, CVSRTA RVA - K S Venkatakrishanan 30.06.2019

 Satyam bruyat priyam bruyat na bruyat satyam apriyam
Priyam ca nanrutam bruyat esha dharman sanatanah

Speak truth in such a way that it should be pleasing to others. Never

speak truth which is unpleasant to others. Never speak untruth,
which might be pleasant. This is the path of eternal morality,
sanatana dharma.

CEP CHENNAI, CVSRTA RVA - K S Venkatakrishanan 30.06.2019

CEP CHENNAI, CVSRTA RVA - K S Venkatakrishanan 30.06.2019