Till now, only an ad-hoc framework for valuation professionals was in place, which is basically governed by the Companies Act, and the government has designated the Insolvency and Bankruptcy Board of India (IBBI) as the authority to implement the new regime of registered valuers.

The move came at a time when stressed companies worth thousands of crores were up for sale under the Insolvency and Bankruptcy Code (IBC) and there was no standardized formula for valuing these assets nor is there a proper regulatory framework governing the valuation profession. Proper valuation of a company is also a crucial part of any merger and acquisition.
 

Accordingly, the Ministry of Corporate Affairs introduced the Companies (Registered Valuers and Valuation) Rules, 2017 (“Rules“). The Rules inter alia provided for the eligibility criteria which need to be fulfilled for obtaining certification for being a registered valuer and the manner in which the certification may be obtained. The Rules also provide that the Insolvency and Bankruptcy Board of India (“IBBI“) established under the Insolvency and Bankruptcy Code, 2016 be the “registering authority” which will hold examinations and grant certifications of the designation of a “registered valuer”. The valuation by a registered valuer applies to the valuation of assets, liabilities, shares, etc. required under the Companies Act, 2013 and the rules made thereunder. It does not apply to valuations required under other laws unless the other laws mandate valuation by a registered valuer. However, certain SEBI Regulations also mandate valuation by RV. Thus, from February 01, 2019, only a registered valuer is allowed to undertake the valuation required under the Companies Act.

For the valuation of land & building, a registered valuer must be a graduate or postgraduate in Civil engineering, architecture, or town planning with a minimum experience of 3 to 5 years For the valuation of plant & machinery, a registered valuer must be a graduate or post graduate in Electrical or Mechanic Engineering with minimum experience of 3 to 5 years For valuation of securities or financial assets, a person must be a member of ICAI, ICSI or Institute of Cost Accountants of India or an MBA with specialization in Finance, with minimum experience of 3 years in the discipline after completing graduation The registered valuer is responsible for any negligence or misconduct leading to disciplinary action by IBBI and regulatory penalties and fines. Impact on valuation practice in India For a long, in the absence of a specialized cadre of valuers, valuation services have been usually provided by chartered accountants and merchant bankers, etc. They typically issue valuation certificates for the purpose of compliance under the Companies Act and other laws like SEBI Regulations and even the I-T Act. However, the lack of a standardized formula has resulted in too much subjectivity in the valuation of companies. Now with these rules and IBBI being appointed as responsible authority to administer and perform functions under the said rules, the valuation domain is being well regulated.

The MCA has constituted a committee to recommend the valuation standards and policies for compliance by companies and registered valuers. Given the need of the hour, the ICAI has already established a Valuation Standard Board and formulated ICAI Valuation Standards in June 2018. These ICAI Valuation Standards will remain effective till valuation standards are notified by the MCA. Though the valuation of a listed company whose shares are actively traded on a national stock exchange in India can be derived from its prevailing market price over a period of time, the valuation of an unlisted company and its shares is the real challenge.

How will  Rk Associates help in the Valuation of a Company under the Companies Act, 2013?

RK Associates have an amount of good & rich experience in providing Valuation Services in India. Our experts understand the exact value of a company by estimating the valuation of their land & building, assets, and brand, etc.. but even then if any asset will come in the category of Non-Performing Asset, it can be valued by only an IBBI Registered valuer. And then in the end. We have an exact value of a company.