CA Anandkumar Gawade is IBBI Registered Valuer u/s 247 of Companies Act, 2013 for Securities or Financial Assets Class vide registration number IBBI/RV/05/2019/10746. He is also a fellow member of The Institute of Chartered Accountants of India.
He is into practice since 2002 and has advised many clients in Valuation, Amalgamations, Corporate Structuring, Tax & Audit. His clients include NBFCs, Publically Listed Companies, Stock Broking Companies, Manufacturing Companies, Service Industries, Real Estate Companies, etc.
We also facilitate a valuation report from SEBI Registered Category I. Merchant Bankers. Listed companies require from Merchant Bankers under various regulations. For unlisted companies under Income Tax Act, Merchant Bankers valuation reports are required to arrive at “Fair Market Value” under the discounted cash flow method (DCF Method).
Valuation exercise is not new to our profession. It is prevalent for many years, especially post liberalization of the economy in 1992. However, valuation as a profession was neither under the purview of any authority nor any specific guidelines or standards were issued for the same. For the first time, Companies Act, 2013 incorporated provisions of Registered Valuers and made mandatory to obtain reports from Registered Valuers w.e.f. 1st February 2019.
In this regards, Ministry of Corporate Affairs (MCA) has issued notification dated 18/Oct/2017 to notify section 247 of the Companies Act , 2013. Section 247 is a governing section for Registered Valuers. MCA has issued The Companies (Registered Valuers and Valuation) Rules, 2017 for procedural matters. Accordingly, IBBI is appointed as Authority to overall supervision, management and registration of Valuers under the Act
Valuation by registered valuers.—
(1) Where a valuation is required to be made in respect 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 shall be valued by a person having such qualifications and experience and registered as a valuer in such manner, on such terms and conditions as may be prescribed and appointed by the audit committee or in its absence by the Board of Directors of that company.
(2) The valuer appointed under sub-section (1) shall,—
(a) make an impartial, true and fair valuation of any assets which may be required to be valued;
(b) exercise due diligence while performing the functions as valuer;
(c) make the valuation in accordance with such rules as may be prescribed; and
(d) not undertake valuation of any assets in which he has a direct or indirect interest or becomes so interested at any time during or after the valuation of assets.
(3) If a valuer contravenes the provisions of this section or the rules made thereunder, the valuer shall be punishable with fine which shall not be less than twenty-five thousand rupees but which may extend to one lakh rupees: Provided that if the valuer has contravened such provisions with the intention to defraud the company or its members, he shall be punishable with imprisonment for a term which may extend to one year and with fine which shall not be less than one lakh rupees but which may extend to five lakh rupees.
(4) Where a valuer has been convicted under sub-section (3), he shall be liable to—
(i) refund the remuneration received by him to the company; and
(ii) pay for damages to the company or to any other person for loss arising out of incorrect or misleading statements of particulars made in his report.
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SL. no
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Section/Rule
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Particulars
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Details
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1
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62(1)C
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Valuation report for Further Issue of Shares
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If any company plans to issue new shares (including a rights issue to existing shareholders or to employees under employees stock options), the price of such shares should be determined by the valuation report of a Registered Valuer
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2
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192(2)
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Valuation of Assets Involved in the Arrangement of Non-cash transactions involving Directors
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In case of sale or purchase of any asset involving a company and the directors of the company (or its holding, subsidiary or associate company) or a person connected with the Director for consideration other than cash, the value of the assets has to be calculated by a Registered Valuer
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3
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230(2)(c)(v)
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Valuation of shares, property, and assets of the Company under a scheme of Corporate Debt Restructuring
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In case of a compromise or arrangement between members (such as in mergers or amalgamations) or with creditors (such as in corporate debt restructuring), a valuation report in respect of shares, property or assets, tangible and intangible, movable and immovable of the company, or a swap ratio report by a Registered Valuer is required.
In the case of mergers, the directors are also required to circulate a report to members specifying, inter alia, any
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4
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230(3)
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Valuation report along with Notice of creditors/shareholders meeting –Under scheme of compromise/Arrangement
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In case of a compromise or arrangement between members (such as in mergers or amalgamations) 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 by a Registered Valuer is required.
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5
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232(2(d)
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The report of the expert with regard to valuation, if any, would be circulated for meeting of creditors/Members
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Same as above
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6
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232(3)(h)
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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
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Same as above
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7
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236(2)
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Valuation of equity shares held by the Minority Share Holders
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In case an acquirer or person acting in concert with the acquirer acquire 90% or more of the equity capital in a company, they can offer to the minority shareholder (or the minority shareholder can offer to the acquirer) to acquire the minority shareholding at a valuation determined by the Registered Valuer.
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8
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281(1)
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Valuing assets for submission of report by liquidator
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A valuation of assets of the company prepared by the Registered Valuer is required in case of winding up, voluntarily or otherwise.
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9
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305(2)(d)
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Declaration of insolvency in case of proposal to wind up voluntarily
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Where a proposal for voluntary winding up has been made by a company, a declaration must be made by the board of directors that the Company has no debt or whether it will be able to pay its debt in full from the proceeds of assets sold in voluntary winding up. The declaration made must be accompanied by, among other things, a valuation report prepared by registered valuer of the assets of the company.
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10
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319(3)(b)
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Power of Company Liquidator to accept shares etc, as consideration for sale of property of the Company
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Any member of the transferor company who did not vote in favour of the special resolution and expresses his dissent therefrom in writing addressed to the Company Liquidator, and left at the registered office of the company within seven days after the passing of the resolution, may require the liquidator to purchase his interest at a price to be determined by agreement or the registered valuer.
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11
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Rule 2 of (Acceptance of deposit) Rules,2014 Companies
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Exclusions from Deposits
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As per the rule, deposit includes any receipt by way of deposit or loan or in any other form by a company but does not include, among other things, money raised by issue of debentures secured by a charge on company’s assets.The amount of such debentures shall not exceed the market value of the assets as determined by a registered valuer.
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12
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Rule 8 of Companies (Share capital and Debentures) Rules, 2014
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Issue of Sweat Equity Shares
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This rule applies to all companies except listed companies issuing sweat equity shares to its directors or employees. The rule prescribes that the sweat equity shares shall be issued at a price determined by a registered valuer as the fair price giving justification for such valuation. Also, the value of the intellectual property or know-how or any other value additions, for which the sweat equity shares have been issued to its directors or employees shall be determined by a valuation report of a registered valuer. If the sweat equity shares are issued for a non-cash consideration, the value of such non-cash consideration shall be based on a valuation report by a registered valuer. Additionally, if the sweat equity shares are issued pursuant to acquisition of an asset, the value of such asset shall also be determined based on a valuation report by a registered valuer.
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Sr No.
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SEBI Regulation
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Particulars
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1
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SEBI (Issue of Capital and Disclosure Requirements) Regulations, 2018
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158(6)(b). Conversion price of debt, as part of a debt restructuring scheme shall be certified by two independent valuer.
163(3). Where the specified securities are issued on a preferential basis for consideration other than cash, the valuation of the assets in consideration for which the equity shares are issued shall be done by an independent valuer, which shall be submitted to the stock exchanges where the equity shares of the issuer are listed: Provided that if the stock exchange(s) is not satisfied with the appropriateness of the valuation, it may get the valuation done by any other valuer and for this purpose it may seek any information, as deemed necessary, from the issuer.
165. Where the shares of an issuer are not frequently traded, the price determined by the issuer shall take into account the valuation parameters including book value, comparable trading multiples, and such other parameters as are customary for valuation of shares of such companies: Provided that the issuer shall submit a certificate stating that the issuer is in compliance of this regulation, obtained from an independent valuer to the stock exchange where the equity shares of the issuer are listed.
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2
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SEBI (Listing Obligations And Disclosure Requirements) Regulations, 2015
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87C(1)(ii). An issuer whose security receipts are listed on a stock exchange shall ensure that the valuation is conducted by an independent valuer
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3
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SEBI (Appointment of Administrator and Procedure for refunding to the Investors) Regulations 2018
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7(2)(b). the Administrator shall engage the services of a registered valuer to evaluate the properties of defaulter that are attached by the Recovery Officer and for submission of a certified valuation reporting accordance with the guidelines issued by the Board.
8(1). The Administrator shall undertake the process of the sale of properties after conducting an independent valuation of such properties by a registered valuer.
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4
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SEBI (Real Estate Investment Trust) Regulations, 2014
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21(4). A full valuation shall be conducted by the valuer at least once in every financial year: Provided that such full valuation shall be conducted at the end of the financial year ending March 31st within three months from the end of such year.
21(5). A half-yearly valuation of the REIT assets shall be conducted by the valuer for the half-year ending on September 30 for incorporating any key changes in the previous six months and such half-yearly valuation report shall be prepared within forty-five days from the date of the end of such half year.
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5
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SEBI (Infrastructure Investment Trusts) Regulations, 2014
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21(4). A full valuation shall be conducted by the valuer not less than once in every financial year: Provided that such full valuation shall be conducted at the end of the financial year ending March 31st within two months from the date of end of such year.
21(5). A half yearly valuation of the assets of the InvIT shall be conducted by the valuer for the half-year ending September 30th for a publicly offered InvIT for incorporating any key changes in the previous six months and such half yearly valuation report shall be prepared within one month from the date of end of such half year.
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6
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SEBI (Issue and Listing of Securitized Debt Instruments and Security Receipts) Regulations, 2008.
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38G(1)(a). An issuer whose security receipts are listed on a recognized stock exchange shall ensure that the valuation is conducted by an independent valuer
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Sr. No
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Regulation
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Particulars
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Details
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1
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2(1)(m)
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Definitions
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2
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27
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Appointment of Registered Valuers
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The IRP shall within seven days of his appointment, appoint two registered valuers to determine the liquidation value of the corporate debtor in accordance with Regulation 35
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Each Registered Valuer shall be following international accepted valuation standards or Valuation Standards issued by respective RVO. In India, so far only ICAI has issued Valuation Standards.
Each valuation report should have following contents:
(a) Background information on the asset being valued;
(b) Purpose of the valuation and appointing authority;
(c) The 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 the report;
(f) Inspections and/or investigations undertaken;
(g) Procedures adopted in carrying out the valuation and valuation standards followed;
(h) Nature and sources of the information used or relied upon;
(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 the valuer, which shall not be for the purpose of limiting his responsibility for the valuation report.
General Standards
IVS 101 Scope of Work
IVS 102 Investigations and Compliance
IVS 103 Reporting
IVS 104 Bases of Value
IVS 105 Valuation Approaches and Methods
Asset Standards
IVS 200 Business and Business Interests
IVS 210 Intangible Assets
IVS 300 Plant and Equipment
IVS 400 Real Property Interests
IVS 410 Development Property
IVS 500 Financial Instruments
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