SEBI

Provisions for Valuation by Registered Valuer under Companies Act, SEBI and IBC

The Companies (Registered Valuer and Valuation) Rules, 2017 and Section 247 of the Companies Act, 2013 both became effective from 18 October 2017. It was justified that conduct of valuation by any person under the eyes of law other than the Act, or these rules must not be affected by virtue of coming into effect of these rules. There was the requirement of the other relevant laws or other regulatory bodies for valuation by any person in accordance with these rules, in that case, these rules must apply for such valuation from the date specified under the laws and by the regulatory bodies.

MCA has bought the notification on 2017, 23 October, for administration and performing functions under the said rules, as specified by the Insolvency and Bankruptcy Board of India (IBBI) as the authority to regulate and administer the registered valuer.

Provisions Given under The Companies Act, 2013 which Requires Valuation Report From A Registered Valuer

Rule 12(5) of the Companies (Prospectus and Allotment of Securities) Rules, 2014

Allotment of Shares in consideration besides Cash- In the case of securities if not are bonus shares allotted as fully or partly paid-up for consideration besides the cash, then Form PAS-3 shall be attached to the copy of the contract and duly stamped. A report obtained from the registered valuer in respect of valuation of the consideration shall also be attached along with the contract.

Section 62 (1) (C) read along with Rule13 of the Companies (Share Capital and Debentures) Rules, 2014

Further issue of Shares– When the Company proposes to further issue the shares of Company to any person bypassing the Special Resolution, on a preferential basis the price for such preferential allotment shall be determined by registered valuer only.

Rule 8 of Companies (Share Capital and Debentures) Rules, 2014

Issuance of Equity Shares- These rules apply to all companies except listed companies issuing equity shares to its employees or directors. The rule prescribes that the equity shares shall be issued at a price as a fair price giving justification for such valuation determined by a registered valuer. The value of the intellectual property or any other value additions, for which the equity shares have been issued to its employees or directors, has to be determined by a valuation report of a registered valuer. If the equity shares are issued for non-cash consideration, the value of that non-cash consideration must be based on a valuation report by the registered valuer. Also, if the equity shares are issued pursuant to the acquisition of an asset, the value of such asset also has to be determined based on a valuation report by a registered valuer.

Rule 16(1)(c) of Companies (Share Capital and Debentures) Rules, 2014

Buy-Back of Shares- When the shares of a company are not listed on a recognized stock exchange, the valuation of that shares are to be purchased has to be made by a registered valuer

Rule 2(c)(ix) and Rule 6(1) of Companies (Acceptance of Deposit) Rules, 2014

Valuation of Secured Debentures- The Secured Debentures if valued by the Registered Valuer will be excluded from the definition of Deposits.

177 (4) (vi) Valuation of Assets with reference of Audit Committee

Valuation of undertakings or assets of the company, when it is necessary, it has to be done by registered valuer only.

Section 192(2) Valuation of Assets acquired for a Consideration besides Cash

If a director of Company subsidiary or associate company or a person connected wants to acquire or acquires assets for consideration besides cash, from the company, then the value of the assets involved must be calculated by a registered valuer.

Section 230(2)(c)(v) and Section 230(3)

Valuation of shares, property and assets of the Company in need of compromise or arrangement. A valuation report regarding shares, assets or property, tangible and intangible, movable and immovable of the company, made by a Registered Valuer in case of a compromise or arrangement between members (such as in mergers) or with creditors (such as in corporate debt restructuring. That particular valuation report is required to be shared with Notice of creditors/ shareholders meeting– Under the scheme of compromise/Arrangement

Section 232 (2)(d) and Section 232 (3)(h)(B) Valuation of Assets in case of the Merger and Amalgamation

The report of the Registered Valuer with regard to valuation has to be circulated for the meeting of creditors and members. The Valuation report is 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

Section 236(2) Valuations of Shares in case of purchase of Minority Shareholding

The acquirer, person or group of persons under sub-section (1) must offer to the minority shareholders of the company for buying the equity shares held by the shareholders at a price determined on the basis of valuation by the registered valuer.

Section 281(1)(a) Valuing assets for submission of report by the liquidator

Valuation of Assets for submission of report by the liquidator in case of winding up is required to be done by Registered Valuer.

Section 305 (2) (d) Declaration of Insolvency

When there is a proposal for Voluntary winding up which is made by a Company, the Declaration of Insolvency given by Directors must be accompanied with the Valuation report issued by the registered valuer

Section 319 (3)(b) Sale of property of Company in consideration of Shares

The member of the transferor company who does not vote in favour of the special resolution and also who expresses his dissent therefrom in writing addressed to the Company Liquidator within 7 days after the passing of the resolution, and left at the registered office of the company requires the liquidator to purchase his interest on the price has to be determined by agreement or the registered valuer.

Provisions given under SEBI, Which Requires Valuation Report from A Registered Valuer

SEBI (Issue of Capital and Disclosure Requirements) Regulations, 2018- Provisions of Preferential Issue does not to apply to certain below

• 158(6)(b) Conversion price of debt, as a debt restructuring scheme, has to be certified by two independent registered valuer
• 163(3) when the specified securities are issued on a preferential basis for consideration besides cash, the valuation of the assets for which the equity shares are issued has to be be done by a valuer, which must be submitted to the stock exchanges where the equity shares are listed. Provided that if the stock exchange is not satisfied with the appropriateness of the valuation, then the valuation can be done any other valuer and for this purpose, it may seek any information, as deemed necessary, from the issuer.
• 165– When the shares of an issuer are not frequently traded, the price determined by the issuer must be taken into account the valuation parameters including book value, comparable trading multiples. Such other parameters are as customary for valuation of shares of those companies. Provided that the issuer has to submit a certificate stating that the issuer is in compliance of this regulation, and that has to be obtained from an independent valuer to the stock exchange when and where the equity shares of the issuer are listed.

SEBI (Appointment of Administrator and Procedure for refunding to Investors) Regulations, 2018

• 7(2)(b)- Functions of the Administrator: The Administrator must engage the services provided by the registered valuer to make an evaluation of the properties of defaulter that are attached by the Recovery Officer. Also for submission of a certified valuation reporting accordance with the guidelines issued by the Board
• 8(1)- Sale of Properties: The Administrator has to undertake the process of the sale of properties after conducting a separate valuation of those properties by a registered valuer.

SEBI (Listing Obligations and Disclosure Requirements Regulations), 2015         

• 87C (1)(ii)- Valuation, Rating and NAV disclosure: An issuer whose security receipts are listed on a stock exchange must ensure that the valuation is conducted by a registered valuer.

SEBI (Issue and Listing of Securitized Debt Instruments and Security Receipts) Regulations, 2008

• 38G (1)(a)- Valuation, Rating and NAV disclosure: An issuer whose security receipts are listed on a recognized stock exchange must ensure that the valuation is conducted by a registered valuer.

Provisions Given under the Insolvency And Bankruptcy Code, 2016 And The Regulations, which Requires Valuation Report From A Registered Valuer

Section 59(3)(b)(ii) of Insolvency and Bankruptcy Code, 2016

Voluntary liquidation of corporate persons: When a proposal for Voluntary winding up is made by a Company, the Declaration of Insolvency given by Directors must be accompanied along with the Valuation report issued by Registered Valuer.

Section 46(2) of Insolvency and Bankruptcy Code, 2016

Relevant period for avoidable transactions: In the application for avoiding a transaction at undervalue the Adjudicating Authority needed an expert to assess evidence relating to the value of the transactions.

Regulation 27 read with regulation 35 of the IBBI (Insolvency Resolution Process for Corporate Persons) Regulations, 2016

Appointment of registered valuer: The interim resolution professional must within 7 days, has to appoint two registered valuers for determining the liquidation value of the corporate debtor according to Regulation 35. The resolution professional must within seven days of his appointment, but not later than forty-seventh day from the insolvency commencement date, has to appoint two registered valuers for determining the fair value and the liquidation value of the corporate debtor according to regulation 35

Regulation 35 of IBBI (Liquidation Process) Regulations, 2016

Valuation of assets intended to be sold: The assets which are sold by liquidator has to be valued by Registered Valuer.

Regulation 3(1)(b)(ii) of the IBBI (Voluntary Liquidation Process) Regulations, 2017

Initiation of liquidation: The Declaration of Insolvency given by Directors must be accompanied with the Valuation report issued by Registered Valuer.

Regulation 26 of IBBI (Fast Track Insolvency  Resolution Process for Corporate Persons)  Regulations, 2017

Appointment of registered valuer: The resolution professional must within seven days has to appoint one registered valuer for determining the fair value and the liquidation value of the corporate debtor according to Regulation 34.

Regulation 34 of IBBI (Fast Track Insolvency Resolution Process for Corporate Persons) Regulations, 2017

The Fair value and liquidation value: When the registered valuer appointed under regulation 26 he must submit to the resolution professional an estimate regarding the fair value and Liquidation value.

Conclusion

When there is a non-availability of the registered valuer, the transitional period was allowed up till 31st Day of January 2019, in other words, if any of the people who have been rendering valuation services under the Companies Act, on the date of commencement, he was continuing to render valuation services without any certificate of registration under these rules. However, now, the Valuation Reports after 1st February 2019 has to be obtained from Registered Valuers registered with IBBI.