CMA Aseem Jain
We have to understand why valuation and respective valuers are required. There are two reasons, one is for legislative or Regulatory and other one is for Decision Making. For regulatory reasons having certain Section/Provision in Company Act, Income Tax Act, SEBI & RBI etc. For decision making like: – Buy or sale of business, Merger, Amalgamation, Acquisition or determination of fair market value etc.
There are two reasons to notify this rule; first for making uniformity in valuation process & outcome and second one is to make the professional working in discipline manner.
Any professional has to discharge his duty as a valuer. Prior to 18th Oct 2017 or before the notification for these rules, non availability of required information and Data was basic hurdle. And professionals have to use their self assessment method which are based on their experience and also on certain assumptions. Professionals were used to determine life cycle of the Product , demand and supply of the product within or outside boundaries etc etc. to reach at the value of particular product/assets.
Two major changes have come out after 18th Oct, 2017 ie “Code of Conduct” and other one is “Valuation Standard”. All valuation has to be completed by professional within these two brackets and content of these two brackets are universally accepted.
MCA has notified this rules, on 18th Oct, 2017, GSR No 1316 (E) by referring the four sections of Companies Act 2013.
Section 247- Valuation by registered valuers.
States that a Registered Valuer would carry out Valuation in respect of any Property, Stocks, Shares, Debentures, Securities or Goodwill or any other assets or Net Worth of a company or its liabilities and that valuer shall have such qualifications and experience and *being a member of an organisation which is recognised, on such terms and conditions as may be prescribed.
This section is having main crux of valuation rule and referred these four important points
1. Registered Valuers
2. Specified Assets and Liabilities
3. Minimum Prescribe Qualification and Experience
4. Recognized Organization
Section 458- Delegation by Central Government of its Power and Functions. Central Govt. has applied this power and delegates his power to IBBI for drafting this rules
Section 459- Power of Central Government or Tribunal to accord approval, etc., Subject to condition and to prescribe fee on application.
Section 469- Power of Central Government to make rule. Used this power and notified rules by MCA.
This valuation rule is divided in six Chapters and four Annexure detail as below:-
1. Short title and commencement.
CHAPTER II Eligibility, Qualifications And Registration Of Valuers
3. Eligibility for registered valuer
4. Qualifications and experience.
5. Valuation Examination.
6. Application for certificate of registration.
7. Conditions of Registration.
8. Conduct of valuation.
9. Temporary surrender
10. Function of valuer.
11. Transitional Arrangement.
CHAPTER III Recognition Of Valuation Professional Organisations
12. Eligibility for registered valures organisations.
13. Application for recognition.
14. Conditions of Recognition.
CHAPTER IV Cancellation or suspension of certificate of registration or recognition
15. Cancellation or suspension of certificate of registration or recognition.
16. Complaint against a registered valuer or registered valuer orgnisation.
17. Procedure to be followed for cancellation or suspension of registration or recognition certificate
CHAPTER V Valuation Standard
18. Valuation Standard
19. Committee to advise on valuation matters
20. Punishment for contravention
21. Punishment for false statement
Annexure I Model Code Of Conduct For Registered Valuers
Annexure II Form of Application and Certificates
Annexure III Governance Structure and Model Bye Laws for RVOs
Annexure IV Indicative Matrix on requisite Qualification/experience in specified discipline
The main crux of the rules is as under:
In Chapter I, having two rules and deals with information like effective date of rule and certain important definitions like: Act, Authority, Assets Class, Certificate of Recognition etc.
In Chapter II have rules from 3 to 11, and have provisions regarding “Registered Valuers Professional”.
> Professional has to file an application with IBBI within three year after clearing valuer examination, to get them registered as registered valuer
> If registered valuer professionals wants to make an entity in the form of Partnership, LLP and Company, minimum three partner or director is required
> Minimum Prescribe Qualifications and Experience to become a registered valuer
|Post graduate Degree/Diploma||3 Year|
|Bachelor’s Degree||5 Year|
|Membership of professional institute establish by an act of parliament||3 year|
> All Assets and Liabilities has been classified in three categories along with their specified domain professionals.
|Assets Class||Domain Professionals|
|A- Land & Building||Civil Engineering|
|B- Plant & Machinery||Mechanical OR Electrical Engineering|
|C- Securities and Financial Assets||CMA, CS, CA|
> Professionals can appear in the valuation examination, if he is having minimum prescribe qualification & experience in respective class of assets along with completion of 50 hour training as will be provided by R.V.O
a) The examination is conducted online with objective multiple-choice questions
b) The duration of the examination is 2 hours;
c) A candidate is required to answer all questions;
d) Wrong answer attracts a negative mark of 25% of the marks assigned.
e) Candidate needs to secure 60% of marks for passing;
f) Successful candidate is awarded a certificate by the Authority;
g) Candidate is issued a temporary mark sheet on submission of answer paper;
h) Candidate may use a non-memory based calculator. No mobile phone is allowed.
i) The examination is available from a number of locations in the country
j) The examination is available on every working day
k) A candidate needs to provide PAN and Aadhaar to enroll for the examination.
l) The educational course for the asset class shall be delivered by the RVO in not less than 50 hours.
m) Candidate having the required qualification and experience and having completed the education course specified above shall be eligible for registration as a valuer on passing the valuation examination of the asset class conducted by the Authority.
n) The educational course will be reviewed on a yearly basis.
> For getting certificate of registration form the authority need to follow certain procedure like: – File an application in Form A or B along with prescribe fee which is not refundable and has to complete this process within prescribe time limit.
> This rule is applicable only in relation to valuation as per certain section of Companies Act, Insolvency Code and SEBI Regulation. If any other Authority, Act/law, Regulation wants to get the benefits of this Rule, they have to modify in their Act/law like in- GST, Income Tax, RBI etc.
> Any person (Not having a member of RVO), may continue the work upto 31st March 2018 and, if assignment has not completed till 31st March 2018, than further 3 month extension is granted for completion of work. But one notification has cone on dated 9th Feb 2018 to replace DATE from 31st 2018 to 30th Sept. 2018
In Chapter III have rules from 12 to 14 and having provision relating to registered valuer orgnisation.
> RVO can be form in two ways one is under Section 8 of Companies Act 2013 and by professional institute establish under the Act of Parliament like:- CMA, CA, CS
> For getting certificate of recognition from the authority need to follow certain prescribed procedure like: – File an application in Form D along with prescribe fee and minimum prescribe attachments and has to complete this process within prescribe time frame.
In Chapter IV have rules from 15 to 17 and having provision relating to cancellation or suspension of certificate of registration or recognition. And having prescribed procedure for filing complaint against professional & R.V.O.
In Chapter V have rules from 18 to 19 and having for valuation standard. One committee will be form having name “Committee to advice on Valuation matters”. On recommendation of this committee Central Government may notify, modify and alter this valuation standard.
And having following composition of member in this committee
|No of Member||Member in the Committee|
|Upto 4||Nominated By Central Government Valuer|
|Upto 4||Representative of R.V.O.|
|Upto 2||Member who represent industry and other stakeholder nominated by CG in consultation with the authority|
|The Chairperson and Member of Committee shall gave a tenure of 3 Year and they shall not have more than 2 Tenure|
In Chapter VI have rules from 20 to 21 and having provision relating to fine and penalties for professionals.
Annexures have define certain specified Procedure, Directions, Guidelines and formats of Application & certificate along with prescribe fee for professional & R.V.O.
In Annexure I having following guidelines and Model Code of Conduct for registered valuers which are as below:-
1- Integrity and Fairness
2- Professional Competence and due care
3- Independence and Disclosure of Interest
5- Information Management
6- Gifts and Hospitality
7- Remuneration and Costs
8- Occupation, Employment and Restriction
In Annexure II having certain form and application which is used by Registered Valuer, RVO and Authority.
|1||Form A||Application for Registration as a valuer by an Individual|
|2||Form B||Application for Registration as a valuer by a Entity Partnership/ LLP/ Company|
|3||Form C||Certificate of Registration|
|4||Form D||Application for Recognition-RVO|
|5||Form E||Certificate of Recognition|
In Annexure III having certain provisions for Governance Structure and model Bye Laws of R.V.O. which is categories in two parts:-
2-R VO to have Bye-Law
3-Amendment of Bye-Law
4-Composition of the Governing Board
4-Duties of Organisation
5-Committee of the Organisation
7-Duties of members
8-Monitoring of members
9-Grievance Redressel Mechanism
11-Surrender of membership and expulsion from membership
In Annexure IV having the Indicative Matrix on requisite qualification/experience in specified discipline. Here we are showing the assets class of “Securities or Financial assets”.
|Asset Class||Educational qualification in specified discipline||Experience in Specified Discipline||Valuation Specific Education Course|
|Graduate level||Post Graduate level|
|Securities or financial Assets||Graduate in any stream||(1) Member of the Institute of chartered Accountants or the Institute of cost Accountants of India or the Institute of company secretaries of India;
(2) MBA/ PGDBM specialization in finance or;
(3) Post Graduate Degree in finance
|Three year of Experience in the discipline after completing graduation.||Courses as per syllabus specified under rule 5|
|Any other Graduate level qualification in accordance with rule 4 as may be specified by the authority for a registered values organization in its conditions of recognition.||Any other post Graduate level qualification in accordance with rule 4 as may be specified by the authority for a registered values organization in its conditions of recognition.||At least five years and three years of experience in case of graduate level degree and post graduate level degree respectively.||Courses as per syllabus under rule 5|
|Any other asset class along with corresponding qualification and experience in accordance with rule 4 as may be specified by the authority for a registered valuers organization in its conditions of recognition|