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business valuation quality

Hong Kong Business Valuation Quality initiative

Background

As a leading global capital market it is vital that there is confidence in the business valuations undertaken in Hong Kong by both listed and private companies. As a 2017 article in A Plus reported, valuations have long been a concern in Hong Kong for the Securities and Futures Commission (SFC) and others.


Hong Kong currently lacks technical and professional standards to ensure that valuations meet an accepted standard. The mixed performance of business valuers requires duplication of efforts by companies, auditors and regulators to screen questionable valuations.


On 4 July 2019, the SFC issued a statement noting that “In 2017 and 2018, the SFC issued letters of concern to more than 46 listed issuers about proposed corporate transactions or other actions. More than 55% of these cases involved proposed corporate acquisitions or disposals.” The statement reported eight areas of concern regarding corporate acquisitions and disposals.


The statement also commented that while there was no requirement for listed company directors to obtain independent professional valuations, a failure to do so is “likely to constitute a breach of [a company’s directors’] duty to exercise the degree of care, skill and diligence reasonably expected of them.”


Promoting competence and professional quality is vital for Hong Kong to maintain its leading reputation as a global capital market.

The Hong Kong Business Valuation Quality Initiative Task Force

The Hong Kong Business Valuation Quality Initiative Task Force was set up to develop a framework to help elevate standards and professionalism in valuations for the Hong Kong market. The task force consists of a number of professional bodies and companies in Hong Kong, including the Institute, and led by the International Valuation Standards Council, the independent global standard setter for the valuation profession.

The proposed framework supports business valuation practices in Hong Kong and aims at improving practices by promoting competence and allowing only appropriately-qualified professionals to perform business valuations for listed and private companies.

The consultation

The consultation has been prepared by the task force, and asks for responses to 14 questions across the following topics: ethics, competencies and local body of knowledge, continued professional development, technical standards, performance framework, and investigations and complaints mechanism.

Comments should be submitted (ideally in word format) to both comments@ivsc.org and BVQI.comments@hkicpa.org.hk. Comments should be submitted by Friday, 15 November 2019.

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