Registered Valuers and Valuation under Companies Act 2013

Short Summary:

The Ministry of Corporate Affairs by Notification Dated: 18^th October, 2017 has notified that [1]Section 247 shall come into force w.e.f. 18.10.2017.

MCA further vide [2]notification Dated: 18^th October, 2017 has published rules called the Companies (Registered Valuers and Valuation) Rules, 2017.

In this editorial the author shall discuss the provisions of Section 447 Register Valuer and Valuation along with rules relating to same.

18th October, 2017 onwards, any person who will possess the prescribed qualifications and pass the valuation examination conducted by the Designated Agency, shall be allowed to act as the Registered Valuers.

INTRODUCTION:

Section 247 is new sections under Companies Act. 2013. There is No Corresponding Provision in Companies Act 1956. The Companies Act, 2013 provides statutory backing to the Valuation, its required that in respect of valuation of any property, stocks, shares , debentures, securities or goodwill or any other assets (herein referred to as the assets) or net worth of a company or its liabilities under the provision of this Act, it should be valued by a person having such qualification and experience and registered as valuer in such manner, on such terms and conditions as prescribed under these rules.

The Registered valuer  has been entrusted with various significant responsibilities under the Companies Act, 2013 and relevant rules.

Who is Valuer?

“valuer” means a person registered with the authority in accordance with these rules and the term “registered valuer” shall be construed accordingly.

Functions of a 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.

As per this the Registered Valuers can do valuation under the following Acts/Regulations-

I. Companies Act, 2013

II. Insolvency Code, 2016 and

III. SEBI (REIT and InvIT) Regulations, 2016

Transitional Arrangement

i. 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 certificate of registration under these rules upto 31st March, 2018:

ii. 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 31st March, 2018, the valuer shall complete such valuation or such part within three months thereafter.

Explanation.─ It is hereby clarified that conduct of valuation by any person under any law other than the Act, or these rules shall not be effected by virtue of coming into effect of these rules unless the relevant other laws or other regulatory bodies require valuation by such person in accordance with these rules in which case these rules shall apply for such valuation also from the date specified under the laws or by the regulatory bodies.

REGISTER VALUER

Provisions under the Companies Act, 2013 which requires Valuation Report from a Registered Valuer

S. no.	Section	Particulars
1	62(1)C	Valuation report for Further Issue of Shares
2	192(2)	Valuation of Assets Involved in Arrangement of Non cash transactions involving Directors
3	230(2)(c)(v)	Valuation of shares, property and assets of the Company  under a scheme of Corporate Debt Restructuring
4	230(3)	Valuation report along with Notice of creditors/shareholders meeting –Under scheme of compromise/Arrangement.
5	232(2(d)	The report of the expert with regard to valuation, if any, would be circulated for meeting of creditors/Members
6	232(3)(h)	The Valuation report to be made by the tribunal for exit opportunity to the shareholders of transferor Company – Under the scheme of Compromise/Arrangement in case the Transferor company is Listed Company and the Transferee-company is an unlisted Company.
7	236(2)	Valuation of equity shares held by the Minority Share Holders.
8	260(2) (C)	Preparing valuation report in respect of shares and assets to arrive at the reserve price for company Administrator
9	281(1)	Valuing assets for submission of report by liquidator

A. Eligibility for Register Valuer:

A person shall be eligible to be a registered valuer if he-

(a) is [3]a valuer member of a registered valuers organization;

(b) is recommended by the registered valuers organization of which he is a valuer member for registration as a valuer;

(c) has passed the valuation examination under rule 5 within three years preceding the date of making an application for registration under rule 6;

(d) possesses the qualifications and experience as specified in rule 4;

(e) is not a minor;

(f) has not been declared to be of unsound mind;

(g) is not an undercharged bankrupt, or has not applied to be adjudicated as a bankrupt;

(h) is a person [4]resident in India;

 (i) has not been convicted by any competent court for an offence punishable with imprisonment for a term exceeding six months or for an offence involving moral turpitude, and a period of five years has not elapsed from the date of expiry of the sentence:

Provided that if a person has been convicted of any offence and sentenced in respect thereof to imprisonment for a period of seven years or more, he shall not be eligible to be registered;

(j) has not been levied a penalty under section 271J of Income-tax Act, 1961 (43 of 1961) and time limit for filing appeal before Commissioner of Income-tax (Appeals) or Income-tax Appellate Tribunal, as the case may be has expired, or such penalty has been confirmed by Income-tax Appellate Tribunal, and five years have not elapsed after levy of such penalty; and

(k) is a [5]fit and proper person

B. Qualifications and experience.

An individual shall have the following qualifications and experience to be eligible for registration as register valuer, namely:

(a) post-graduate degree or post-graduate diploma, in the [6]specified discipline, from a University or Institute established, recognised or incorporated by law in India and at least three years of experience in the specified discipline thereafter; or

(b) a Bachelor’s degree or equivalent, in the specified discipline, from a University or Institute established, recognised or incorporated by law in India and at least five years of experience in the specified discipline thereafter; or

(c) Membership of a professional institute established by an Act of Parliament enacted for the purpose of regulation of a profession with at least three years’ experience after such membership and having qualification mentioned at clause (a) or (b).

Note: Qualifying education and experience and examination or training for various asset classes, is given in an indicative manner in [7]Annexure–IV of these rules.

It is mandatory for all eligible persons to pass the Valuation examination for being Registered as a Valuer under these rules.

Example: For valuation of Securities and Financial assets qualification and experience criteria’s are followings:

Education Qualification in Specified Discipline		Experience in Specified Discipline	Valuation Specific Education Course
Graduate in any Stream	Membership of ICAI, ICSI and ICWAI MBA/ PGDBM specialization in finance Post Graduate degree in finance.	Three years of experience in the discipline after completing graduation.	Course as per syllabus specified in Rule 5.

C. Valuation Examination.

(1) 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, and have completed their educational courses as member of a registered valuers organisation, to test their professional knowledge, skills, values and ethics in respect of valuation:………….

(2) The authority shall determine the syllabus for various valuation specific subjects or assets classes for the valuation examination on the recommendation of one or more Committee of experts constituted by the authority in this regard.

D. Application for certificate of registration.

An individual eligible for registration as a registered valuer under rule 3 may make an application to the authority in Form-A of Annexure-II along with a non-refundable application fee of five thousand rupees in favour of the authority.

E. Conditions of Registration.

Maintenance of Records:  maintain records of each assignment undertaken by him for at least three years from the completion of such assignment;

(a) at all times possess the eligibility and qualification and experience criteria as specified under rule 3 and rule 4;

(b) at all times comply with the provisions of the Act , these rules and the Bye-laws or internal regulations, as the case may be, 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 he/it has been registered by the authority;

(d) take prior permission of the authority for shifting his/ its membership from one registered valuers organisation to another;

(e) take adequate steps for redressal of grievances;

 (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;

REGISTER VALUER

F. Conduct of Valuation.

I. standards:

(1) The registered valuer shall, while conducting a valuation, comply with the valuation standards as notified or modified under rule 18: Provided that until the valuation standards are notified or modified by the Central Government, a valuer shall make valuations as per-

(a) internationally accepted valuation standards;

(b) valuation standards adopted by any registered valuers organisation.

II. Contents of Valuation Report

The Valuation Report state the following:-

(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 to the extent they explain or elucidate the limitations faced by valuer, which shall not be for the purpose of limiting his responsibility for the valuation report.

G. Cancellation or suspension of certificate of registration or recognition.-

The authority may cancel or suspend the registration of a valuer or recognition of a registered valuers organisation for violation of the provisions of the Act, any other law allowing him to perform valuation, these rules or any condition of registration or recognition, as the case may be in the manner specified in rule 17.

Punishment:

H. 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. 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.

Conclusion:

The MCA has issued the much awaited valuation rules. The valuation rules address the key areas of concern such as who would be eligible to be registered as a valuer under the 2013 Act, the procedure for registration, the code of conduct required to be followed and the disciplinary proceedings which could be initiated against the valuer in case of non-compliance.

[1] https://taxguru.in/company-law/section-247-companies-act-2017valuation-registered-valuers-applicable-18102017.html

[2] https://taxguru.in/company-law/companies-registered-valuers-and-valuation-rules-2017.html

[3] Explanation.─ For the purposes of this clause, “a valuer member” is a member of a registered valuers organisation who possesses the requisite educational qualifications and experience for being registered as a valuer;

[4] Explanation.─ For the purposes of these rules ‘person resident in India’ shall have the same meaning as defined in clause (v) of section 2 of the Foreign Exchange Management Act, 1999 (42 of 1999) as far as it is applicable to an individual;

[5] Explanation.─ For determining whether an individual is a fit and proper person under these rules, the authority may take account of any relevant consideration, including but not limited to the following criteria- (i) integrity, reputation and character, (ii) absence of convictions and restraint orders, and (iii) competence and financial solvency.

[6] For the purposes of this clause the ‘specified discipline’ shall mean the specific discipline which is relevant for valuation of an asset class for which the registration as a valuer or recognition as a registered valuers organisation is sought under these rules.

[7] https://taxguru.in/company-law/companies-registered-valuers-and-valuation-rules-2017.html

(Author – CS Divesh Goyal, ACS is a Company Secretary in Practice from Delhi and can be contacted at csdiveshgoyal@gmail.com)

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