Earlier before the introduction of Companies Act, 2013 valuation of shares including, assets, net worth of companies was conducted by the Chartered Accountants or as specified under other Acts like Foreign Exchange Management Act, 1999 and the regulations made thereunder or the Income Tax Act, 1961.
The first attempt was made by introducing the Valuation Professional Bill, 2008. The same has been delayed for many years due to the dissolution of parliament. Thereafter, The Central Government of India introduced the Companies (Removal of Difficulties) Second Order, 2017 (dated 23rd October 2017) to conduct valuation which required to be performed by the person possessing the essential requirements, skill and working as a valuer need to register with the authority. The Rules also provide that the Insolvency and Bankruptcy Board of India (“IBBI“) established under the Insolvency and Bankruptcy Code, 2016 be the “registering authority” which will hold examinations and grant certifications of the designation of a “registered valuer”.
The concept of a “registered valuer” under Indian law was introduced for the first time vide Section 247 of Chapter VXII of the Indian Companies Act for matters requiring valuation under the said act. the Ministry of Corporate Affairs introduced the Companies (Registered Valuers and Valuation) Rules, 2017 (“Rules”). Concept of registered valuer opens a new area of professional opportunity.
Section 247 of the Companies Act provides that “where a valuation is required to be made in respect of any property, stocks, shares, debentures, securities or goodwill or any other asset or net worth of a company or its liabilities under the provisions of this Act, it shall be valued by a person having such qualifications and experience and registered as a valuer in such manner and on such terms and conditions as maybe prescribed and appointed by the audit committee or in its absence by the Board of Directors of that company”.
|Rule No.||Rules under Companies Act, 2013|
|1.||Short title, Commencement and Application|
|3.||Eligibility for registered valuers|
|4.||Qualifications and experience|
|6.||Application for certificate of registration|
|7.||Conditions of Registration|
|8.||Conduct of Valuation|
|10.||Functions of a Valuer|
|12.||Eligibility for registered valuers organisations|
|13.||Application for recognition|
|14.||Conditions of Recognition|
|15.||Cancellation or suspension of certificate of registration or recognition|
|16.||Complaint against a registered valuer or registered valuers organization|
|17.||Procedure to be followed for cancellation or suspension of registration or recognition certificate|
|19.||Committee to advise on valuation matters|
|20.||Punishment for contravention|
|21.||Punishment for false statement|
|S. No.||Relevant Section and type of valuation||Type of Issue|
|1.||Section 42 read with Rule 12(5) of the Companies (Prospectus of Securities) Rules, 2014 Valuation of the consideration against which securities are issued||Private Placement of Securities for consideration other than cash|
|2.||Section 62(1)(c) read with Rule 13 of the Companies (Share Capital and Debentures) Rules, 2014 Valuation of price of shares which are being issued||Preferential Issue of further shares|
|3.||Section 52 read with Rule 8 of the Companies (Share Capital and Debentures) Rules, 2014 Valuation of intellectual property rights or of know how or value additions for which sweat equity shares are to be issued||Issue of sweat equity shares to directors/employees at a discount or for consideration other than cash|
|4.||Rule 2(ix) of the Companies (Acceptance of Deposits) Rules, 2014 Assessment of market value of such assets||Amount raised by the issue of bonds or debentures secured by a first charge or a charge ranking pari passu with the first charge on any assets referred to in Schedule III of the Act excluding intangible assets of the company|
|5.||Section 192 Valuation of assets involved||Arrangement with a director of the company, its holding, subsidiary or associate company or any person connected with him for acquisition of assets for consideration other than cash|
|6.||Section 230(2)(c)(v)||Valuation report in respect of the shares and the property and all assets, tangible and intangible, movable and immovable, of the company under the scheme of Corporate debt Restructuring|
|7.||Section 230(3) & 232(2)(d)||In case of a compromise or arrangement between members or with creditors, a valuation report in respect of shares, property or assets, tangible and intangible, movable and immovable of the company, or a swap ratio report|
|8.||Section 232(2)(h)||Under the scheme of Compromise/ Arrangement in case the Transferor company is Listed Company and the Transferee company is an unlisted company- Valuation report is required to be made by the tribunal for exit opportunity to the shareholders of transferor Company|
|9.||Section 236(2)||For valuing equity shares held by Minority Shareholders|
|10.||Section 281(1)(a)||For valuing assets for submission of report by Company liquidator|
|11.||Section 305(2)(d)||For report on the assets of the Company for preparation of declaration of solvency under voluntary winding up|
|12.||Section 319(3)(b)||For valuing the interest of any dissenting members of the transferor company in case of liquidation|
|S. No||Section/Regulation/ Rules||Particulars|
|1||Section 59(3)(b)(ii) – Insolvency and Bankruptcy Code, 2016||Voluntary liquidation of corporate bodies (Asset Valuation Report).|
|2||Section 46(2) – Insolvency and Bankruptcy Code, 2016||The appropriate duration for avoidable transactions (Independent Expert for assessing the evidential value if the transaction.|
|3||Regulation 27 read with regulation 35 of the IBBI (Insolvency Resolution Process for Corporate Persons) Regulations, 2016||1. Appoint registered valuers;
2. Reasonable value and liquidation value.
(The Resolution Professional appoints a Registered Valuer within a week of his appointment).
|4||Regulation 35 – IBBI (Liquidation Process) Regulations, 2016||Valuation of assets intended to be sold (the registered valuer calculates the realizable value of Asset or Property).|
|5||Regulation 3(1)(b)(ii) – IBBI (Voluntary Liquidation Process) Regulations, 2017||Initiation of liquidation (a Valuation report of Asset or Property, if there any).|
|6||Regulation 26 under IBBI (Fast Track Insolvency Resolution Process for Corporate Persons) Regulations, 2017||Appointment of registered valuer (Provide that the person shall not be appointed as the registered valuer in some circumstances).|
|7||Regulation 34 – IBBI (Fast Track Insolvency Resolution Process for Corporate Persons) Regulations, 2017||Fair value and liquidation value (After the physical education makes an estimation based on international standard).|
In addition to above Provisions of the SEBI Real Estate Investment Trusts (REIT) Regulations, 2014 & SEBI Infrastructure Investment Trusts (InvIT) Regulations, 2014 recognized valuer as any person who is a “registered valuer” under section 247 of the Companies Act, 2013 or as specified by the Board from time to time.
From the above discussion, it can be said that there is need to accept the term Registered Valuers under the Income Tax Act, 1961 and in FEMA to the bring a uniformity in the provisions.
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