After February 1st all Valuation to be done by Registered Valuer

Registered Valuer for Valuation: Recent Updates

Section 247 of the Companies Act, 2013 introduced the concept of Registered Valuer for performing and regulating valuation services in India. The Ministry of Corporate Affairs made it as so clear that any valuation of debentures or assets or shares or property of a company is to be performed by a qualified valuer registered with the Insolvency and Bankruptcy Board of India (IBBI). Before the applicability of this new rule the valuation process used be carried out by chartered accountants or other prescribed professional by the statute but from 1st February, 2019 the new notified rule by the government came into effect and clearly states the valuation process to be done by a registered valuer.

Duties of the Valuer during Valuation:

Section 247(2) of the Companies Act, 2013 specifies the duties that are to be undertaken by the registered valuer. These duties are-

  • While performing the duties of the valuer , exercise his due diligence and functions.
  • Follow the prescribed rules and perform the valuation in accordance with them.
  • Does not undertake or perform valuation of shares and assets in which they have direct or indirect interest or becomes interested in during or after the valuation process.
  • Impartially perform true and fair valuation of shares and assets that are required to be valued.

Standards for performing Valuation:

The valuation must be done in accordance with the mandated laws and statutes and must follow some standards and methods stated by the Companies Act, 2013 as per-

  • Valuation standards guided by the Reserve Bank of India (RBI), Securities and Exchange Board of India (SEBI), Registrar of Companies (ROC) and other regulatory bodies in India.
  • Valuation Methodology that is acceptable internationally.
  • Valuation standards that have been adopted and practiced by any professional organization.

Related Provisions:

The provisions and laws in the Companies Act, 2013 that requires a Valuation Services and valuation report from a registered valuer are-

  • Section 62(1) (c) – It states the making of Valuation Report for further Issue of Debentures and Shares.
  • Section 192(2) – It states the valuation of assets involved in arrangement of non-cash transactions involving the directors.
  • Section 230(2) (c) (v) – It states valuation of shares, property and assets of the company under a scheme of Corporate Debt Restructuring.
  • Section 230(3) – It states the valuation report along with notice of the creditors or shareholder meeting under the scheme of Arrangement.
  • Section 232(3) (d) – It states about the report from the expert regarding the valuation, if any, would be circulated for meeting of the creditors or the members.
  • Section 232(3) (h) – It deals with the valuation report to be made by the tribunal for exit opportunity of a transferor company.
  • Section 236(2) – It deals with the valuation of equity shares held by the minority shareholders.
  • Section 247 – It states that where there is valuation required for property, assets, shares, debentures, stocks, securities, net worth or goodwill or liabilities of the company under the said Act, it should be valued by person having experience and qualification and must be registered as a valuer.
  • Section 247(2) – It states the duties to be performed by the Registered Valuer.
Author: Anil Agrawal
EZYBIZ India Consulting LLP, New Delhi. The firm is business and tax consultancy firm providing consultancy in Taxation, Regulatory, Transfer pricing, Valuation, Corporate funding and Business set up matters. He may be reached at 9899217778 or anil@ezybizindia.in.