When and How to Engage a Chartered Business Valuator (“CBV”)
When to involve a CBV
Business owners and legal advisors are often unsure when the services of a CBV are needed and to what extent. Depending on the situation, a CBV could be engaged to act as an independent expert or in an advisory role, where there is no expectation of independence. CBVs are often engaged to work in conjunction with other professionals such as lawyers, accountants and tax specialists.
Examples of situations where a CBV can be involved in are as follows:
|Litigation Related||Non-Litigation Related|
|Breach of contract||Income tax matters|
|Loss of profits||Estate planning and corporate reorganizations|
|Business interruption||Mergers, acquisitions and divestitures|
|Personal injury||Management buy-outs|
|Expropriation||Financial reporting (IFRS and ASPE)|
|Shareholder disputes||Unanimous shareholder agreements (USA)|
|Matrimonial disputes||Employee share ownership plans (ESOP)|
Range of involvement of the CBV
As a trusted expert, the CBV typically provides an expert report containing an independent professional opinion. In doing so, the CBV exercises significant professional judgment and employs his/her experience and independent research. Independent opinion reports prepared on objective basis include the following:
CBVs can act in an advisory capacity where there is no requirement for objectivity or independence, such as:
How to engage a CBV – the Engagement Letter
The engagement letter identifies the parties to the engagement and by whom the CBV is being retained (e.g. client, legal counsel or jointly). Additionally, it provides a written record of agreed terms that eliminate potential misunderstandings and expectation gaps, sets out fee rates, and outlines conduct of the engagement including the expectations of the client’s cooperation and responsibilities. It also sets out the following:
Look for accreditation and experience
A CBV designation is the accreditation from the CICBV which entails carrying out a comprehensive program of studies and experience requirements. CBVs are nationally and internationally recognized as financial experts in valuing businesses and components of cash flow (e.g., losses, financial and intangible assets). Experience in a particular industry may be an advantage in certain valuations and provides some comfort, but on its own is not a substitute for qualified professional valuation knowledge and broad industry experience. CBVs are recognized by the courts and the business community as reliable experts.
Finally, it may be tempting to use a valuation report that was prepared at a previous date and/or for another purpose. This may not be appropriate since the different purpose or the passage of time may have rendered to valuation report inappropriate at the current date – valuations can have a short shelf life. Business owners and legal advisors should be aware of when to engage a CBV to ensure risks related to valuation or litigation are managed appropriately through qualified valuation experts whether it is in an independent expert or in an advisory role.
Irrespective of the purpose for which the CBV is being engaged, involve the CBV as early in the process as possible.
|Edmonton||Mowbrey Gil||Michael Frost, firstname.lastname@example.org|
|Montreal||Demers Beaulne||Michel Hamelin, email@example.com|
|Toronto||Segal||Nathan Treitel, firstname.lastname@example.org|
|Vancouver||DMCL||Danny Loo, email@example.com|
|Ottawa||Marcil Lavallee||Keith Chabot, firstname.lastname@example.org|
Contributed by Michael Frost, CPA, CA, CVA from Mowbrey Gil.
This piece was produced as a part of the quarterly Canadian Overview, a newsletter produced by the Canadian member firms of Moore Stephens North America.