In most insolvencies, there are business assets to be valued – the question is, who do you instruct? Unfortunately, all too often, insolvency practitioners use unqualified valuers – even though they would never dream of using an unqualified lawyer or accountant.
Why it’s important to use a registered and qualified valuer?
Here are six good reasons:
1. Compliance with pre-pack rules
SIP 16 states that where a valuation of the business and assets is prepared in a pre-pack administration the name and qualifications of any valuer and/or advisor must be provided, together with confirmation of their independence and that they carry adequate professional indemnity insurance (PII). If an insolvency practitioner uses a valuer or advisor who does not meet the criteria, they need to justify why.
2. Ensuring a claim would be valid
SIP 16 states that ‘adequate PII for the valuation performed’ is required. PII should allow a person or company instructing a professional advisor to make a claim against them in the event of the advice provided is found to be negligent. However, if it was found that the advisor was not qualified to provide such advice, it would be very easy for the insurer to avoid liability.
3. Meeting agreed standards
Using a qualified valuer ensures that any reports and advice comply with recognised Domestic and International standards. The Royal Institution of Chartered Surveyors (RICS) is the principal UK body for valuations. Obtaining the MRICS qualification requires a rigorous period of study and practical experience followed by examinations, dissertations and peer review – similar to the qualifications for solicitors, accountants and insolvency practitioners.
Under RICS rules, anyone providing valuations in insolvency or collateralised lending must have the further designation of the registered valuer. Valuations of real estate or chattel assets for an insolvency practitioner are deemed to be regulated purpose valuations, which ensures that all advice is of the highest possible standard.
A registered valuer will use internationally recognised definitions such as market value. Other bases commonly referred to – such as ‘forced sale’, ‘going concern value’, ‘realisable amount’, ‘estimated realisation price’ and similar descriptions – are not formally recognised.
4. Balanced and impartial advice
Often insolvency practitioners will consult specialist dealers or agents for valuation advice. While they may be experts in their field, other assets which are outside their sphere of experience are often overlooked – from websites, domain names and trademarks to fluctuating assets like work in progress and the order book.
Regardless of the specialist knowledge of such industry experts, creditors will always be able to question their independence and the potential conflict of interest and the insolvency practitioner will have little if any, defence.
5. Protection for clients’ money
Where 50 percent or more of the directors of a firm of surveyors hold RICS membership, the firm must be registered with RICS, which brings with it further obligations, for example, if that firm operates a client’s account they must hold clients’ money in a designated client account. Such accounts are regularly audited by RICS, giving clients added protection. Clients’ accounts are also insured, providing further security.
6. An added-value service
RICS members are required to undertake 20 hours or more of CPD per annum, it is likely that your RICS valuer will, therefore, be up-to-date with recent developments. Due to the extensive study and continued experience they gain, RICS valuers also provide a tangible level of added-value service. They are often able to provide advice on issues such as Control Orders, landlords, third-party assets, intellectual property and goodwill, fixed and floating charges, thus providing insolvency practitioners with a holistic view of the assets and the business.
Do you need to speak to a team of Qualified valuers? Click here to contact Charterfields. Our expert team will be glad to assist you.