Key Points / Highlighters pertaining to notified Section 247 of the CA, 2013

The Ministry of Corporate Affairs has issued Notification for commencement of Section 247 of the Companies Act, 2013 [Valuation by Registered Valuers] with effect from 18th October, 2017. The Companies (Registered Valuers and Valuation) Rules, 2017 (Rules), which have been finalized.

The Rules provide for registration of different category of valuers and lay down the requirements on their eligibility, qualifications and experience. The Registered Valuers are also required to be members of the Registered Valuers Organisations (RVOs), recognised by the authority under the Rules.

The Rules provide for a transition period upto 30 Sep, 2018 for registration of valuers with the authority keeping in view the period which would be required by the valuers’ organisations and the valuers to fulfil the requirements under the law. During this transition period any person who may be rendering valuation services under the Companies Act, 2013 may continue to render such services without getting registered under the Rules.

No. Heading Content / Key Highlighters
1 Title Companies (Registered Valuers and Valuation) Rules, 2017 w.e.f 18 Oct 2017
2 Definitions 1.Registration Authority here is IBBI (Insolvency and Bankruptcy Board of India)

  1. Certificate of Recognition – Rule 13 and 14
  2. Certificate of Registration – Rule 7
3 Eligibility 1. No Person without obtaining CoR shall practice as Regd. Valuer

2. Must have passed the Valuation exam 3 years preceding the date of Application for Regn

3. Possess qualification as mentioned in Rule 4

4. Not a minor, not an unsound mind, not an undischarged bankrupt, is a Resident, must not have been earlier levied penalty u/s 271J Rs. 10,000/- for each report/certificate.

5. In case of Firm 3 or all partner (whichever is lower) are not RV

6. RV shall make impartial, True and Fair Valuation, Exercise Due diligence, make valuation as per the rules prescribed.

7. If Valuer contravenes than punishable with fine extending to Rs. 1 lac + refund the fees and pay for damages to the company.

4 Qualification and Experience Qualification for eligible to be registered

PG or PG diploma from University or Institute established and 3 years of experience

Bachelor from University or Institute established and 5 years of experience

Member of Professional Institute established under Act and 3 years of Experience

5 Valuation Examination Eligibility The authority shall, either on its own or through a designated agency, conduct valuation examination for one or more asset classes, for individuals, who possess the qualifications and experience as specified in rule 4

Provided that the authority may recognise an educational course conducted by a registered valuers organization before its recognition adequate for the purpose of appearing the valuation exam

Provided that Authority may recognize an exam conducted as a part of Master & PG degree conducted by a University equivalent to valuation examination.

6 Application 1. Form A of Annexure II for Individual (fees Rs. 5,000/-)

2. Form B of Annexure II for Partnership Firm/Company (fees Rs. 10,000/-)

3. In case of deficiency in abovementioned Forms’ 21 days are allowed by Authority to rectify the deficiency and revert. In case of error free form Certificate of Regn in Form C of Annexure II is issued within 60 days of receipt of application.

4. In case Authority is of the opinion for not issuing the CoR it should within 45 days communicate the same.

7 Condition of Registration a. The registration granted under rule 6 shall be subject to the conditions that the valuer shall –

(a) at all times possess the eligibility, qualification & experience as ment. u/r 3 & 4;

(b) at all times comply with the provisions of the Act , rules & regulations of the respective registered valuers organisation;

(c) in his capacity as a registered valuer, not conduct valuation of the assets or class(es) of assets other than for which registered by the authority;

(d) take prior permission of the authority for shifting membership from one registered valuers organization to another;

(e) take adequate steps for redressal of grievances;

(f) maintain records of each assignment undertaken by him for at least 3 years from the completion of such assignment;

(g) comply with the Code of Conduct (as per Annexure-I of these rules) of the registered valuers organisation of which he is a member;

(h) in case a partnership entity or company is the registered valuer, allow only the partner or director who is a registered valuer for the asset class that is being valued to sign and act on behalf of it;

(i) in case a partnership entity or company is the registered valuer, it shall disclose to the company concerned, the extent of capital employed or contributed in the partnership entity or the company by the partner or director, as the case may be, who would sign and act in respect of relevant valuation assignment for the company;

(j) in case a partnership entity is the registered valuer, be liable jointly and severally along with the partner who signs and acts in respect of a valuation assignment on behalf of the partnership entity;

(k) in case a company is the registered valuer, be liable alongwith director who signs and acts in respect of a valuation assignment on behalf of the company;

(l) in case a partnership entity or company is the registered valuer, immediately inform the authority on the removal of a partner or director, as the case may be, who is a registered valuer along with detailed reasons for such removal; and

(m) comply with such other conditions as may be imposed by the authority

8 Valuation Method a. Internationally accepted valuation standards

b. Valuation standards adopted by registered valuers organization

Content Report:

(a) background information of the asset being valued;

(b) purpose of valuation and appointing authority;

(c) identity of the valuer and any other experts involved in the valuation;

(d) disclosure of valuer interest or conflict, if any;

(e) date of appointment, valuation date and date of report;

(f) inspections and/or investigations undertaken;

(g) nature and sources of the information used or relied upon;

(h) procedures adopted in carrying out the valuation and valuation standards followed;

(i) restrictions on use of the report, if any;

(j) major factors that were taken into account during the valuation;

(k) conclusion; and

(l) caveats, limitations and disclaimers

9 Temporary surrender 1. A registered valuer may temporarily surrender his registration certificate in accordance with the bye-laws of the Regd Valuers Orgn (RVO) & inform the authority accordingly

2. The RVO shall inform within 7 days to the Authority the fact of surrender of CoR

3. The RVO shall on the website maintain register of Members in searchable format

10 Function of Valuer A valuer shall conduct valuation required under the Act as per these rules and he may conduct valuation as per these rules if required under any other law or by any other regulatory authority
11 Transitional Arrangement Any person who may be rendering valuation services under the Act, on the date of commencement of these rules, may continue to render valuation services without a CoR under these rules upto 30 Sep, 2018 (extended from 31/03/18):

Provided that if a company has appointed any valuer before such date and the valuation or any part of it has not been completed before 30 Sep 2018 (extended from 31/03/18), the valuer shall complete such valuation within 3 months.

12 Eligibility for registered valuers organisations 1. it has been regd u/s 25 of CA, 1956 or regd u/s 8 of CA, 2013 with sole object of matter relating to Valuation and has in its bye laws req. specified in Ann III

2. Professional Institute esbld by Act of Parliament

3. org regd under Society Regn Act

4. Org setup under the Indian Trust Act

5. Org conducts Educational course, grants Mem or Certificate of Practise, Conducts Training of Individual, Code of Conduct as mentioned in Ann-I, Provides continuing education, monitors and review functionality of Members, has Grievance Redressal.

An RVO shall convert itself in s 8 company and should incl bye laws as mentioned in Ann III within 1 year of date of commencement of this rule.

13 Application for Recognition Required in Case of RVO application in Form D of the Annexure II
14 Condition for Recognition Similar to or in line with those mentioned for individual mentioned above in Rule 7 as are applicable to RVO hence not described in detail here
15 Cancellation of Recognition For violation of provisions of the Act
16 Complaint against RV or RVO May be filed with non-refundable fees of Rs. 1000. RVO will treat the complaint in accordance with the bye laws
17 Procedure to be followed for Cancellation or Suspenstion of CoR or RC (Recognition cert) Based on the findings of an inspection or investigation, or a complaint received or on material otherwise available on record, if the authorised officer is of the prima facie opinion that sufficient cause exists to cancel or suspend the registration of a valuer or cancel or suspend the recognition of a registered valuers organisation, it shall issue a showcause notice to the valuer or registered valuers organization. The order passed shall be effective until 30 days have been elapsed from the date of issue; person aggrieved can appeal against the order
18 Valuation Report The Central Government shall notify and may modify (from time to time) the valuation standards on the recommendations of the Committee set up under rule 19
19 Committee for Valuation The Central Government may constitute a Committee to be known as “Committee to advise on valuation matters” to make recommendations on formulation and laying down of valuation standards and policies for compliance by companies and registered valuers
20 Punishment for contravention Without prejudice to any other liabilities where a person contravenes any of the provision of these rules he shall be punishable in accordance with sub-section (3) of section 469 of the Act. I.e. Rs. 5000 and in case of continuing offence Rs. 5000 per day during the period such contravention continues
21 Punishment for false statement If in any report, certificate or other document required by, or for, the purposes of any of the provisions of the Act or the rules made thereunder or these rules, any person makes a statement,—

(a) which is false in any material particulars, knowing it to be false; or

(b) which omits any material fact, knowing it to be material, he shall be liable under section 448 of the Act i.e. shall be punishable with imprisonment for a term which shall not be less than six months but which may extend to ten years and shall also be liable to fine which shall not be less than the amount involved

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