"Legal Amendments Are Necessary" – Vugar Oruc

Although the “Law on Valuation Activity” was only recently adopted, there is already a pressing need for serious reforms in this field. Considering that many laws in Azerbaijan undergo amendments after their adoption, changes to the “Law on Valuation Activity” are also inevitable.

This initiative has been put forward by Vugar Oruc, Chairman of the Azerbaijan Society of Appraisers (AQC) and President of the Council of Appraiser Associations of Turkic States (CAATS).

He believes that the main changes should relate to the valuation directions:
"The new law, adopted at the end of 2023, outlines nine different directions for valuation activities. These include the valuation of enterprises, movable and immovable property (including land plots), movable and immovable cultural heritage, cultural assets, historical, cultural, and natural monuments, intangible assets and securities, creditor liabilities and other obligations, natural resources, damages, lost profits and risks, and services. When the law was being drafted, we proposed to streamline these valuation directions. Our proposal still stands today, and I believe it’s time to revisit the law.

Imagine a scenario where a certified valuer for enterprises is not authorized to conduct valuations in other sectors. However, an enterprise valuer should logically also assess the assets of the enterprise, which include movable and immovable property. This means that the enterprise valuer is actually qualified to evaluate at least five of the other categories, as they are directly related to the financial reporting of the enterprise. Similarly, valuations of movable and immovable property are closely related fields. A professional working in one of these areas is capable of operating in the other at the same level of expertise. The list goes on. Therefore, the number of valuation directions should be consolidated and reduced from nine to three or four. In neighboring countries and in international practice, the classification is more often based on professional levels rather than narrowly defined directions.”

Commenting on the professional qualification exams held by the State Examination Center (SEC), the AQC chairman noted that five exams have been conducted so far, with the sixth exam, as stipulated by the Law, scheduled for July 17. Vugar Oruc emphasized that the absence of a published question bank has created difficulties for participants.

“There will be a six-month gap before the next exams. The SEC should use this time to compile a question bank with the involvement of experts from UNEC (University of Economics), the Azerbaijan Appraisers’ Chamber, and AQC. This would be a significant support to our sector,” he stated.

Another proposal by the economist involves the creation of a regulatory body to oversee valuation, financial-accounting, and audit activities.
“Currently, the Appraisers’ Chamber and the Chamber of Auditors operate in Azerbaijan. According to existing legislation, these chambers implement regulatory policies in their respective sectors. Their operations are independent, and their management bodies are formed by representatives from the sectors themselves. While this is generally a correct approach, complete independence can sometimes lead to problems and attempts at market interference.

Moreover, these three closely related sectors often suffer from errors caused by professionals who do not adhere to internal boundaries. Such mistakes hinder the proper and lawful organization of financial and accounting activities. The same individual or company should not conduct both audit and valuation activities. In addition, for the development of accounting practices, it would be appropriate to establish a regulatory body. While there are professional associations in these fields, they lack the administrative authority to influence the activities of market participants. Therefore, there is a special need to create a structure under the Ministry of Finance that would oversee the regulation of the valuation, financial-accounting, and audit sectors,” Vugar Oruc explained.

He added that proposals on this matter will be submitted to the Presidential Administration, the National Assembly (Milli Majlis), and relevant government institutions. A request will also be made for a meeting with the Economic Policy, Industry, and Entrepreneurship Committee of the Milli Majlis.