Wednesday, May 19, 2010
Are some service providers violating the Independent Appraisal Presumption that is a MUST for a 409A valuation?
When we analyzed some of the service providers out there for 409A valuation services, we have come across some companies that provide 409A valuation services possibly in violation of the independent appraisal presumption. These companies provide other services such as banking, receivables collection, IPO advisory, CFO rental services and similar such services for a fee to privately held companies, yet at the same time provide 409A valuation services. The Independent Appraisal presumption requires the appraiser to have an arms length relationship with the clients and not be affiliated under other business activities. It is important for companies to insist on laying out in the certification that the appraiser works under the "Independent Appraisal" presumption, so as not to have the entire report invalidated by the IRS during an audit.