Presentation on Regd. Valuer under Companies Act 2013 By CA. Manish Khanna

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 Applicant is Individual/ Partnership Firm Form No 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] Registered Valuer under CA, 2013

Concept of Regd. Valuer Registered Valuer Financial Valuer Technical 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 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. NoSectionSub- Section Synopsis 1247Responsibilities of a Registered Valuer 2 39 read with Rule 3.9 4Allotment of securities for consideration other than cash 3 54 read with Rule 4.6 1Issue of Sweat Equity Shares in case of unlisted companies 4 62 read with Rule 3.9 & Rule (c) Issue of shares / convertible securities on preferential basis by unlisted company for cash or for consideration other than cash 5 67 read with Rule (b) Provision of money by company for purchase of its own shares by employees or by trustees for the benefit of employees 6191 read with Rule 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. NoSectionSub- Section Synopsis 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 82302(c)(v)In case of any scheme of corporate debt restructuring read with Rule Offer of takeover of an unlisted company as a result of compromise or arrangement [Rule 15.11(1), (6), (7)] 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 (h)(B)Exit for dissenting shareholders of transferor company: read with Rule Purchase of minority shareholding (a)Submission of report by Company Liquidator in case of winding up order by NCLT

Role of Registered Valuer S. No SectionSub- Section Synopsis (d) Voluntary winding up - Declaration of solvency in case of proposal to wind up voluntarily (b) Power of Company Liquidator to accept shares, etc. as consideration for sale of property of company under voluntary winding up 3251(b)For valuation of annuities and future and contingent liabilites in winding up of insolvent companies

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 Penalty upon contravention 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 Penalty in case of intention to fraud 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  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 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) Name & Address of Valuer; Registration no and Id of Valuer Description of Valuer Name of Client and other intended users; Purpose of valuation Description of valuation engagement Nature of business/asset/liability; Legal background, financial aspects and tax matters Description of business/assets/liability to be valued Analysis of past results, budget with underlying assumptions; Statement of Responsibility Availability and quality of underlying data; review of budget Description of information underlying the valuation 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 Description of specific valuation of assets used in Business 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. Confirmation for valuation as per Rules 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. Benchmarking with previous valuation done, if any

Points to be considered by Regd. Valuer Business related Nature of business History of enterprise Nature of product/services, risk associated with the business Economy related Economic outlook in general Outlook of specific industry in particular Financials 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; Intangible values; contingent liabilities; substantial legal issues; 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.

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