Use of Caveats, Limitations and Disclaimers by the Registered Valuers- IBBI Guidelines (Insolvency and Bankruptcy Board of India)

4 min

23 points

-Submitted By

Pratiti Shah
Final Year Business Law student at
NMIMS Kirit P. Mehta School of Law, Mumbai


On 1st September 2020, the IBBI issued Guidelines referred to as Insolvency and Bankruptcy Board of India (Use of Caveats, Limitations, and Disclaimers in Valuation Reports) Guidelines, 2020.

The new Guidelines are issued in exercise of the powers under Rule 14(i) of the Companies (Registered Valuers and Valuation) Rules, 2017 that designates Insolvency and Bankruptcy Board of India as the authority for development and regulation of the valuation profession.

The said Guidelines shall come into force on or after 1st October, 2020 in respect of valuation reports completed by Registered Valuers (RVs).

The main purpose of the said Guidelines is to provide guidance to the Registered Valuers in the use of Caveats, Limitations, and Disclaimers to increase credibility of the valuation reports. The said IBBI Guidelines also provide an illustrative list of the Caveats, Limitations, and Disclaimers which shall not be used in a valuation report.

According to the Guidelines:

(i) An RV shall prepare valuations reports under rule 8 of the Rules in adherence to these Guidelines.

(ii) An RVO shall monitor adherence to these Guidelines through scrutiny of the valuation reports.

These Guidelines are divided into three sections. The primary section elaborates on the need for Caveats, Limitations, and Disclaimers in a valuation report.  The secondary section provides a guidance note on the use of Caveats, Limitations, and Disclaimers, and the third section provides an illustrative list of Caveats, Limitations, and Disclaimers for each asset-class as mentioned in the Rules.



The valuation of an asset is an estimation of worth of that asset which is arrived after factoring in multiple parameters and externalities. This value may not be the actual price of the asset and a different price of the asset can be discovered by the market later. The ability and integrity of Registered Valuers (RVs) get questioned when different estimates are provided by different valuers for the same asset. Such difference is possible especially when the purpose of such report is not the same. However, such difference is not favourable for stakeholders where crucial economic and commercial decisions are mainly based on Valuation reports provided by RVs.


A limitation arises if the RV is unable to obtain sufficient information and explanations considered necessary for the purpose of the valuation. Where such limitation results in the RV being unable to carry out the valuation in accordance with the normal approach to valuation, the valuation report shall be modified with a paragraph setting out the nature of circumstances, giving rise to the limitation.


The reasons for providing disclaimers in a valuation report are as under:

  1. A disclaimer protects the rights of a RV by cautioning and dissuading others when using the contents of a valuation report.
  2. A disclaimer limits the liability of a RV since it serves both as a warning and a way to mitigate risk, a disclaimer protects a RV from liability. Anyone who reads the disclaimers should understand the risks involved in using the valuation report or acting upon the information that it contains.
  3. A disclaimer protects the RV from incurring liability or limits the liability of the RV from the actions of the company or management or insolvency professional at whose instructions the valuation has been carried out.

A valuation report should not carry a disclaimer, which has potential to dilute the responsibility of the RV or makes the valuation unsuitable for the purpose for which the valuation was conducted. The valuation reports should be capable of being tested through the crucible of legal evidence in judicial proceedings.

The following points may be considered while providing disclaimers in a valuation report. An RV may:

(a) Identify the rights he/she wants to protect;


(b) Identify the areas where he/she might be subject to liability;

(c) Clarify that the contents of the valuation report pertain to specific use by the company; and

(d) Caution the reader of the potential risks.

However, a disclaimer will not, by itself, be able to exclude an RV’s liability in respect of negligence in performance of his duties.


As per Section 247 of Companies Act, valuation is generally required in the context of the following:

  1. Consummation of certain transactions like acquisition, disposal, merger, amalgamation;
  2. Internal decision making/Corporate Governance;
  3. Regulatory Compliance: Companies Act, SEBI Regulations, Income Tax, Wealth Tax, FEMA, etc.;
  4. Fund Mobilisation – both equity and debt;
  5. Disputes (within and outside the courts);
  6. Borrowing and lending decisions; and
  7. Insolvency and Bankruptcy proceedings.

The objective of the said Guidelines is to provide guidance to the RVs in the use of Caveats, Limitations, and Disclaimers in the interest of credibility of the valuation reports. These also provide an illustrative list of the Caveats, Limitations, and Disclaimers which shall not be used in a valuation report.

As per the new guidelines a detailed and fully reasoned valuation report should be prepared in every case of valuation done in respect of both mandatory and discretionary valuation, where an RV is appointed. The following aspects need to be considered during the preparation of a valuation report.

    A) Content 

This content requirement is in interest of stakeholders and the need for transparency and principles of good corporate governance. The listed content matter are to be compulsorily covered in a clear, unambiguous and non-misleading manner, consistent with the need to maintain confidentiality:

  • Background Information of the asset that is being valued
  • Purpose of valuation
  • Bases and Premise of Value
  • Identity of the RV
  • Intended Users of the Valuation;
  • Date of appointment
  • Inspections
  • Business interest or ownership
  • Significant Assumptions
  • Restrictions and Major factors that were taken into account during valuation
  • Caveats, limitations and disclaimers

    B) Procedure

Procedure for the valuation shall vary according to the circumstances however the principal procedures shall be:

  • All the past financials shall be reviewed
  • All the financial projections shall be reviewed and analysed
  • Industry analysis
  • SWOT analysis
  • Similar transactions shall be compared with
  • Other listed company comparison shall be done
  • Management shall discuss the valuation and review the agreements and the documents related to the valuation.
  • Site visit
  • All the limits and disclaimers relating to the caveat shall be disclosed.


A few samples of Caveats, Limitations, and Disclaimers have been provided for each asset class in the guidelines issued by IBBI. The asset classes are:-

  1. Land and Building
  2. Plant and Machinery
  3. Securities or Financial Assests

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23 points