More is expected from appraisers – Kommersant

Large-scale changes in the ownership structure of Russian companies after the departure of Western investors due to the military operation of the Russian Federation in Ukraine required the authorities to step up their attention to the asset valuation process. The Ministry of Economy has developed a draft law that provides for the introduction of increased requirements for contractors of state property valuation services, as well as a revision of approaches to the property liability of appraisers. Thus, it is proposed to write down that losses are compensated in all cases of assessment, since in practice, when it is not mandatory, the courts often refuse to recognize losses, and also to provide for the procedure for compensation for losses and the possibility of limiting their size in the contract. Experts believe that innovations can increase market transparency and the quality of services, but appraisers consider the tightening of liability to be excessive.

The Ministry of Economy has prepared a draft amendment to the law on valuation activities, which continues to reform this area. As Ilya Torosov, the first deputy head of the department, explained to Kommersant, the amendments “are aimed at protecting the interests of the state as a consumer of valuation services, as well as ensuring the efficiency of the mechanisms of responsibility for the quality of the valuation.” The project clarifies that an appraisal company is considered not just if there are at least two appraisers in the state – for them this organization should be the main place of work. At the level of the law, increased requirements are also introduced for the performers of state property valuation services, regardless of who orders them. This is due to the fact that additional requirements are imposed only when assessing state real estate and with a government contract price of 500,000 rubles or more, but any state property can be assessed, and other persons can order an assessment outside of competitive procedures, for example, tenants.

According to the amendments, the appraiser will have to have at least a dozen property valuation reports and at least three business valuation reports, not be subject to disciplinary liability and not have cases of recognizing the report as unreliable for three years. Companies must have five years of experience and at least five appraisers (at least two must meet the increased requirements). Now, explains Ilya Torosov, the one who offered the lowest price wins the tender for the assessment of state property, this gives rise to dumping and low-quality assessment, since the contract is executed by appraisers without sufficient experience. According to him, the analysis of purchases over six years showed that about half of the contracts for the assessment of state property were concluded with a price reduction of at least 50%, there are also contracts for a price of only 1 ruble. Valuation activity, says Ilya Torosov, “does not belong to charity, and when assessing state property, the existence of such contracts raises concerns.”

The second novelty is the strengthening of liability in case of damage to the customer or third parties due to poor-quality assessment. The draft clarifies that they are reimbursed regardless of the obligation to conduct an assessment, as well as in cases where it is impossible to use the report. This is due to the recognition of the current mechanism as ineffective and with practice – as the rector of the Institute of Vocational Education Yulia Usova says, “the courts refuse to recognize losses for banks that ordered an assessment of the value of collateral, since such an assessment is not mandatory.” At the same time, the project introduces a sequence of compensation for losses (see Kommersant-Online) and the possibility of establishing in the contract their maximum sizes (now – full liability).

Maxim Skatov, President of the SRO Union of Appraisers’ Specialists, believes that it is impossible to tighten the responsibility of appraisers, “it is already redundant”, moreover, if the report cannot be used, it can be given to the customer, who already has the tools for “insurance” from a poor-quality assessment, reasons for abusing one’s position. Instead, he believes, raising the requirements can improve the quality of the valuation: the condition that the valuation company should be the main place of work will already make the market more transparent, since it happens that one appraiser is listed in 15 organizations, but if they are raised even more seriously, for example, up to five appraisers, then “a couple of thousand companies will leave the market and stop dumping.” According to Anton Vovk, a member of the council for valuation activities under the Ministry of Economy, the project will create a transparent system for selecting companies for state property valuation, as well as improve the quality of such services and reduce losses from budget funds. Yulia Usova also adds that the project “removes non-working full liability due to the possibility of fixing its maximum size and makes the insurance mechanism work.”

It should be noted that the innovations of the Ministry of Economy, which have been discussed for several years, will now come in time due to significant changes in the structure of the owners of many Russian assets after the withdrawal of Western investors due to the military operation of the Russian Federation in Ukraine. In particular, the assessment of the shares of foreign companies transferred to Russian owners is important for the Ministry of Finance, since it is used in calculating the so-called exit tax (see Kommersant of March 29).

Evgenia Kryuchkova, Oleg Sapozhkov