The valuation of capital in Montenegro is regulated by the Law on Companies (“Official Gazette of Montenegro”, no. 65/20), the Law on Accounting (“Official Gazette of Montenegro” no. 52/16), as well as the Regulation on the Methodology for Valuation of Property (Official Gazette of Montenegro no. 64/18).
The purpose of capital valuation is to project the price at which a sale/transfer of ownership transaction (capital participation) could be executed. Another term for it is capital valuation. It is often an official document that can be used for purposes such as:
- Decision-making in M&A transactions: the assessed value is compared with the investor’s offer;
- Tax purposes: for example, to determine capital gains tax when selling ownership;
- Strategic decision-making: all business activities should ultimately aim to maximize the company’s value.
The basic three approaches to capital valuation are:
- Cost approach;
- Market approach;
- Income approach.
The valuation process itself involves providing expert opinions on value and determining the value of assets based on a systematic approach, which includes the following activities:
- Physical and legal identification of the property being valued (subject of valuation);
- Identification of property rights (documentation);
- Determination of the purpose of the valuation;
- Determination of the effective date of the valuation;
- Collection and analysis of data required for the chosen approach and valuation methods;
- Selection and application of valuation methods;
- Drawing conclusions on value and preparing reports.