Like any entrepreneur, you certainly want your company to prosper continuously and not encounter financial problems. But there are less fortunate situations in which entrepreneurs can no longer afford to pay their debts, which leads them to insolvency. A very important aspect, insolvency is not the same as bankruptcy, as these are two distinct stages. Bankruptcy is the last stage of the insolvency procedure, which a company reaches only if the reorganization plan fails within a period of time imposed by law.
Insolvency is legally regulated by Law No. 85/2014, which was later supplemented and amended by Emergency Ordinance No. 88/2018.
Within the insolvency procedure, the role of the valuation and the valuer is necessary and very important throughout the entire duration of the procedure and its phases (observation, reorganization, bankruptcy).
Insolvency valuations generally have a high (or higher) degree of complexity than other types of valuations, for several reasons:
– As a rule, all assets in the debtor company's assets are evaluated (real estate, movable property, intangible assets, financial assets, etc.);
– Asset valuation can be carried out both individually and in bulk;
– Both the market value (assuming continued activity) and the liquidation value (assuming cessation of activity – both in the premise of an orderly sale and a forced sale) are estimated;
– The purpose and type of value must be consistent with the phase in which the debtor company is in.
From the above-mentioned aspects we can conclude that although such valuations are complex and require a high degree of knowledge, collaboration with the administrator/judicial liquidator is essential so that they are very well understood and correlated with the purpose and type of value, as well as with the reporting of the results. Collaboration with creditors should not be forgotten either, as long as they can provide us with information/documents about the assets they have as collateral.
The impact of the evaluation results on the decisions that will be taken in the procedure can be decisive. No matter how good professionals we are, without transparent communication with the parties involved in this process (even with the debtor) we will not be able to claim high confidence in the evaluation report, and it can be contested (by the administrator/judicial liquidator or by creditors).
The valuation requested within the insolvency procedure offers the valuer the chance to move to a new professional stage, to progress and master less frequently used techniques, and, if you want, to get rid of automatisms, considering that such valuation missions are very rarely similar.
In addition to objectivity and professionalism, which the profession's code of ethics imposes anyway, communication and the way we make the results of our work understood should not be neglected, all of this in order to claim and obtain the due respect and trust.
