Presentation on Regd.Valuer under
Companies Act 2013
By CA. Manish Khanna
Registered Valuer under CA, 2013
Companies Act, 2013 has introduced a new concept
‘REGISTERED VALUERS’ under Chapter XVII
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Registration with the Central Govt. or institution or agency
notified by the Central Govt.
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Form No. 17.1 - Applicant is Individual/
Partnership Firm
Form No. 17.2 - Applicant is Company / LLP
Persons eligible to be valuers
Removal of names from register of valuers
Methods of valuation
Contents of Valuation report [Form no 17.3]
Concept of Regd. Valuer
Registered Valuer
Financial Valuer
• Valuation of Stock, Shares,
Debentures, Securities or
financial assets of similar nature
• A CA, CS, CWA in whole time
practice or retired member of
Indian Corporate law service or
any other person
• A Merchant Banker regd with
SEBI and which has in
employment under it
CA/CS/CWA for carrying out
and signing the valuation report
Technical Valuer
• Primarily valuation of Property
or asset of similar nature
• Member of Institute of
Engineers or member of
Institute of Architects in whole
time practice
• A person or firm or LLP
possessing both the
qualifications may act in dual
capacity
• Shall have 5 years of post
qualification experience
Registered Valuer to be appointed by Audit Committee or in its by the Board of
Directors
Role of Regd. Valuer (Financial assets)
Compromise & Arrangement
Corporate Debt Restructuring
Exit to minority shareholders
Winding-up/Liquidation
Further Issue of Shares
Non-cash Transactions with Directors
Role of Registered Valuer
S. No
Section
1
247
2
39 read with
Rule 3.9
54 read with
Rule 4.6
62 read with
Rule 3.9 &
Rule 4.11
67 read with
Rule 4.14
191 read with
Rule 12.16
3
4
5
6
SubSection
Synopsis
Responsibilities of a Registered Valuer
4
Allotment of securities for consideration other than cash
1
Issue of Sweat Equity Shares in case of unlisted companies
1(c)
Issue of shares / convertible securities on preferential basis by
unlisted company for cash or for consideration other than cash
3(b)
Provision of money by company for purchase of its own shares by
employees or by trustees for the benefit of employees
Payment (other than in cash) to directors by way of compensation
for loss of office or as consideration for retirement from office in
connection with transfer of undertaking, property or shares of the
company
Role of Registered Valuer
S. No
Section
SubSection
Synopsis
7
192
2
8
230
2(c)(v)
Director of a company or its holding, subsidiary or associate
company or any person connected with him acquires or wants
to acquire asset from the company for consideration other than
cash, or vice versa
In case of any scheme of corporate debt restructuring
9
11
Offer of takeover of an unlisted company as a result of
compromise or arrangement [Rule 15.11(1), (6), (7)]
10
230 read with
Rule 15.11
230
3
10
232
2
11
232
3(h)(B)
For valuation including swap ratio under a Scheme of
compromise or arrangement, copy of valuer to accompanied
In case of any scheme for the reconstruction of the company or
companies involving merger /amalgamation or demerger
Exit for dissenting shareholders of transferor company:
12
236 read with
Rule 15.28
281
2
13
1(a)
Purchase of minority shareholding
Submission of report by Company Liquidator in case of winding
up order by NCLT
Role of Registered Valuer
S.
No
Section
SubSection
14
305
2(d)
15
319
3(b)
325
1(b)
Synopsis
Voluntary winding up - Declaration of solvency in case of
proposal to wind up voluntarily
Power of Company Liquidator to accept shares, etc. as
consideration for sale of property of company under voluntary
winding up
For valuation of annuities and future and contingent liabilites in
winding up of insolvent companies
Responsibilities of Regd. Valuer
Responsibilities of Regd.
Valuer
Penalty upon
contravention
Penalty in case of
intention to fraud
• Valuer to make impartial,
true and fair valuation
• Not to undertake valuation
of assets if directly or
indirectly interested
• Exercise Due-diligence and
care
• Valuation to be as per Rules
• Fine from Rs. 25k to Rs.100k
• To refund remuneration
received and also liable for
damages
• A valuer found guilty of
professional misconduct or
sentenced to imprisonment
for any offence, shall be
removed from register and
cease to be valuer
•
• Imprisonment upto 1 year
• Fine from Rs. 100k to 500k
The draft Rules provides for removal and restoration of names of Valuer from the register maintained by CG or any authority.
Draft Rules on Regd. Valuer
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Approaches prescribed
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Asset approach
Income approach
Market approach
Following methods to be considered by Regd. Valuer:
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Asset Approach
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Market Approach
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Net Asset Value method
Sum of Part valuation
Liquidation Value
Market Price method
Comparable Companies Multiple Method
Comparable Transaction Multiple Method
Price of Recent Investment
Income Approach
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PECV method
DCF method
Weighted avergae method
• Any other method accepted or notified by the RBI, SEBI or Income tax authorities
• Any other method that Valuer may deem fit provided adequate justification for use
of such method is prescribed
Contents of Valuation Report (Form 17.3)
Description of Valuer
Description of valuation
engagement
Description of
business/assets/liability to
be valued
Description of
information underlying
the valuation
Description of specific
valuation of assets used in
Business
Confirmation for
valuation as per Rules
Benchmarking with
previous valuation done, if
any
•Name & Address of Valuer; Registration no and Email Id of Valuer
•Name of Client and other intended users;
•Purpose of valuation
•Nature of business/asset/liability;
•Legal background, financial aspects and tax matters
•Analysis of past results, budget with underlying assumptions; Statement of Responsibility
•Availability and quality of underlying data; review of budget
•Basis of Value; Valuation date; procedures carried out; Principles used in Valuation;
•Valuation method used and reasoning; Nature, scope and quality of underlying data; extent of estimates
•Confirmation that the valuation has been undertaken after taking into account relevant
conditions/regulations/rules/notifications, if any, issued by Central or State government from time to
time.
•In case Valuer has been involved in valuing any part of the subject matter of valuation in the past, the past
valuation report should be attached and referred to. In case a different basis has been adopted then
adopted in the past, the Valuer should justify the reason for the same.
Points to be considered by Regd. Valuer
Business
related
Economy
related
Financials
related
• Nature of business
• History of enterprise
• Nature of product/services,
• risk associated with the business
• Economic outlook in general
• Outlook of specific industry in particular
• Financial condition of business; Earning capacity; Dividend paying capacity;
• Book value of stock; market prices of stock of listed peers; Size of the block of shares to be
valued;
• Intangible values; contingent liabilities; substantial legal issues;
• Nature of instrument proposed to be issued; Nature of transaction contemplated
Finer points…..
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As per the Draft Rules,Valuation Date means the date on
which estimate of value is applicable which may be different
from valuation report or date on which investigation were
undertaken or completed
Flexibility to Valuer to use other method provided there is
suitable justification for the same
The law states that the Valuer should exercise ‘Due Diligence’.
Due diligence is very broad term and should be defined for
sake of clarity and to avoid confusion and fixation of
responsibility where the scope has excluded it explicitly
Referring the appointment to BoD or Audit committee could
take lot of time for approval.
Queries
Thank You