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
 Registration with the Central Govt. or institution or agency
notified by the Central Govt.
• 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 Technical Valuer

• Valuation of Stock, Shares, • Primarily valuation of Property

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
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 Sub- Synopsis

Section
1 247 Responsibilities of a Registered Valuer
2 39 read with 4 Allotment of securities for consideration other than cash
Rule 3.9
3 54 read with 1 Issue of Sweat Equity Shares in case of unlisted companies
Rule 4.6
4 62 read with 1(c) Issue of shares / convertible securities on preferential basis by
Rule 3.9 & unlisted company for cash or for consideration other than cash
Rule 4.11
5 67 read with 3(b) Provision of money by company for purchase of its own shares by
Rule 4.14 employees or by trustees for the benefit of employees
6 191 read with Payment (other than in cash) to directors by way of compensation
Rule 12.16 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 Sub- Synopsis
Section
7 192 2 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
8 230 2(c)(v) In case of any scheme of corporate debt restructuring
9 230 read with 11 Offer of takeover of an unlisted company as a result of
Rule 15.11 compromise or arrangement [Rule 15.11(1), (6), (7)]
10 230 3 For valuation including swap ratio under a Scheme of
compromise or arrangement, copy of valuer to accompanied
10 232 2 In case of any scheme for the reconstruction of the company or
companies involving merger /amalgamation or demerger
11 232 3(h)(B) Exit for dissenting shareholders of transferor company:
12 236 read with 2 Purchase of minority shareholding
Rule 15.28
13 281 1(a) Submission of report by Company Liquidator in case of winding
up order by NCLT
Role of Registered Valuer
S. Section Sub- Synopsis
No Section

14 305 2(d) Voluntary winding up - Declaration of solvency in case of

proposal to wind up voluntarily
15 319 3(b) Power of Company Liquidator to accept shares, etc. as
consideration for sale of property of company under voluntary
winding up
325 1(b) For valuation of annuities and future and contingent liabilites in
winding up of insolvent companies
Responsibilities of Regd. Valuer
Responsibilities of Regd.
Valuer
• 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
The draft Rules provides for removal and restoration of names of Valuer from the register maintained by CG or any authority.
Penalty upon Penalty in case of
contravention intention to fraud
• Fine from Rs. 25k to Rs.100k • Imprisonment upto 1 year
• To refund remuneration • Fine from Rs. 100k to 500k
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
•
Draft Rules on Regd. Valuer

 Approaches prescribed
 Asset approach
 Income approach
 Market approach
 Following methods to be considered by Regd. Valuer:
 Asset Approach
 Net Asset Value method
 Sum of Part valuation
 Liquidation Value
 Market Approach
 Market Price method
 Comparable Companies Multiple Method
 Comparable Transaction Multiple Method
 Price of Recent Investment
 Income Approach
 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 •Name & Address of Valuer; Registration no and Email Id of Valuer

Description of valuation •Name of Client and other intended users;

engagement •Purpose of valuation

Description of
•Nature of business/asset/liability;
business/assets/liability to •Legal background, financial aspects and tax matters
be valued
Description of
•Analysis of past results, budget with underlying assumptions; Statement of Responsibility
information underlying •Availability and quality of underlying data; review of budget
the valuation
Description of specific
•Basis of Value; Valuation date; procedures carried out; Principles used in Valuation;
valuation of assets used in •Valuation method used and reasoning; Nature, scope and quality of underlying data; extent of estimates
Business

Confirmation for •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
valuation as per Rules time.

Benchmarking with •In case Valuer has been involved in valuing any part of the subject matter of valuation in the past, the past
previous valuation done, if valuation report should be attached and referred to. In case a different basis has been adopted then
any adopted in the past, the Valuer should justify the reason for the same.
Points to be considered by Regd. Valuer
• Nature of business
• History of enterprise
• Nature of product/services,
Business
• risk associated with the business
related

• Economic outlook in general

• Outlook of specific industry in particular
Economy
related

• 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;
Financials • Intangible values; contingent liabilities; substantial legal issues;
related • Nature of instrument proposed to be issued; Nature of transaction contemplated
Finer points…..
 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