1. Registered valuer and valuation rules 2017
Hansraj Jaria
CS, LLB, M.COM, CAIIB
Practicing Company Secretary & Corporate Consultant
Ex-Company Secretary of a Tata Steel Group Company
Past Chairman – Hooghly Chapter of ICSI

2. REGISTERED VALUER (Sec. 247)
Section 247(1) introduces the concept of registered valuer which provides that where a valuation is required to be made in respect of
any property, stocks, shares, debentures, securities or goodwill or any other assets or net worth of a company or its liabilities under the Companies Act, it shall be
valued by a person having such qualifications and experience and registered as a valuer in such manner, on such terms and conditions as may be prescribed and
appointed by the audit committee or in its absence by the Board of Directors of that company.
The MCA has issued the Companies (Registered Valuers and Valuation) Rules, 2017 on 18th October, Section 247 has also come into force w.e.f. 18th October, (Postponed till 31st January 2019)

3. Responsibilities of regd. valuer
Section 247(2) set forth that the valuer so appointed shall,—
(A) make an impartial, true and fair valuation of any assets which may be required to be valued;
(B) exercise due diligence while performing the functions as valuer;
(C) make the valuation in accordance with such rules as may be prescribed; and
(D) not undertake valuation of any assets in which he has a direct or indirect interest.

4. Purchase / Sale of Business Portfolio Value of Investments
Merrgerr// Demerrgerr
Purchase / Sale of Business
Private Equity
Buyback of Shares
IPO/ FPO
Why Valuation?
Family Separation
Test of Impairment
PPA
Litigation
Portfolio Value of Investments
Regulatory Approval

5. Companies (Registered Valuers and Valuation) Rules, 2017

6. Valuation Rules in brief
Insolvency and Bankruptcy Board of India to act as the authority under the Rules
Divided into 6 chapters
Effective from 18th October 2017

7. Contents of the Rules Chapter I Definition Chapter II Eligibility
Qualification
Valuation Examination
Condition for registration
Transitional Arrangement, etc
Chapter III
Recognition of Registered Valuer Organisation
Chapter IV
Cancellation or Suspension of Certificate of Registration
Chapter V Valuation Standards
Chapter VI Punishment for Contravention

8. CH. 1 - Definitions “asset class” “certificate of recognition”
▫ distinct group of assets displaying similar characteristics, that can be classified and requires separate set of valuers for valuation
“certificate of recognition”
▫ the certificate granted to
a registered valuers
organisation
“certificate of registration”
▫ the certificate of registration granted to a valuer
“valuation standards”
▫ the standards on valuation to be notified by CG
“valuer”
▫ a person registered with the authority

9. Definitions ▫ “registered valuer organization (RVO)”
▫ means a registered valuers organisation recognised under sub-rule (5) of rule 13;
RVO Registered with RVO
Institution of Estate Managers and Appraisers
IOV Registered Valuers Foundation
ICSI Registered Valuers Organisation
The Indian Institution of Valuers
ICAI Registered Valuers Organisation
ICMAI Registered Valuers Organisation ▫

10. Valuers’ eligibility criteria- Rule 3
For individuals
▫ Passed the valuation examination within 3 years preceding the date of making an application
▫ Valuer member of a RVO
▫ Recommended by the RVO
▫ Possesses the qualifications and experience as specified in rule 4
▫ Not a minor
▫ Not been declared to be of unsound mind
▫ Not an undischarged bankrupt, or has not applied to be adjudicated as a bankrupt
▫ Resident in India

11. Valuers’ eligibility criteria- Rule 3
▫ Has not been convicted for offence punishable with imprisonment for 6 months or involving moral turpitude and 5 years has not elapsed yet
▫ Has not been convicted of any offence and sentenced 7 years of imprisonment
▫ Has not been levied a penalty under section 271J of IT Act and time limit for appeal has expired and 5 years has not elapsed
▫ Fit and proper person :
integrity, reputation and character,
absence of convictions and restraint orders, and
competence and financial solvency
Any other relevant criteria as may be imposed by authority

12. Valuers’ eligibility criteria- Rule 3
For firms/ companies
▫ having objects involving rendering professional or financial services, including valuation services
▫ in the case of a company, it is not a subsidiary, joint venture or associate of another company or body corporate
▫ not undergoing an insolvency resolution or is an undischarged bankrupt
▫ all the partners or directors are not ineligible under individual capacity as for individual valuers
▫ 3 or all the partners or directors, whichever is lower, of the partnership entity or company are registered valuers or
▫ all of its partners or directors is a registered valuer for the asset class, for the valuation of which it seeks to be a registered valuer

13. Qualifications and experience- Rule 4
Post graduate in specified discipline
▫ with atleast 3 years of experience thereafter, or
A bachelor’s degree in the specified discipline
▫ with atleast 5 years of experience thereafter, or
Membership of a professional institute
▫ with atleast 3 years of experience post membership and having any of the qualification mentioned above.

14. Valuation Examination- Rule 5
Asset Class- Land & Building
Asset Class- Plant & Machinery
Asset Class- Securities or Financial Assets

15. Qualifications and experience
Different qualifications of registered valuers for different class of assets in an indicative manner:
▫ For valuation of land & building, a registered valuer must be a graduate or post graduate in Civil engineering, architecture or town planning with minimum experience of 3 to 5 years
▫ For 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 specialisation in Finance, with minimum experience of 3 years in the discipline after completing graduation

16. Valuation Examination- Rule 5
Valuation examination to be conducted by IBBI
▫ For different class of assets
• IBBI shall determine the syllabus
▫ On the recommendation of one or more committee of experts constituted in this regard
• The syllabus, format and frequency of the valuation examination, including qualifying marks, shall be published on the website of IBBI
▫ At least three months before the examination.

17. Valuation Examination- Rule 5
Its an online MCQ Exam
There are 93 questions for financial assets or securities of which 7 questions are based on two case studies, which appears as two cohesive groups in your exam paper.
Out of which 86 questions will be of 1 mark each and 7 questions of 2 marks each.
Total time allotted for exam is 2 hours
A wrong answer attracts a negative mark of 25% of the marks assigned to the question.
You need to score 60% to pass the examination.
Pass Certificate will be given within 30 days of Exam

18. Registration- Rule 6 Application Certificate of registration
▫ Form A- for individuals
▫ Form B- for firm/ company
▫ Submission of additional documents/ clarifications, if requires within 21 days
Certificate of registration
▫ Within 60 days of application excluding 21 days given for additional documents or clarifications

19. Conditions of Registration- Rule 7
Possesses the eligibility and qualifications mentioned in Rule 3 and 4
Complies with the provisions of the Act, Rules, bye- laws or internal regulations of the RVO
Not conduct valuation of assets other than those for which the individual has received CoR.
Take prior permission of IBBI, before changing membership from one RVO to another.
Take adequate steps for redressal of grievances
Maintain records of all assignments undertaken by him/her for atleast 3 years from completion of assignment

20. Conditions of Registration- Rule 7
• Comply with code of conduct stated in Annexure I
• In case of firm /company,
▫ Only those individuals who are registered as valuers for a particular asset, shall be allowed to act and sign on behalf of it.
▫ It shall disclose to the company concerned, the extent of capital employed or contributed in the partnership entity or the company by the partner or director who would sign and act in respect of relevant valuation assignment for the company.
▫ Joint liability along with partner/ director who signs and acts in respect of a valuation assignment.
▫ Immediate intimation to authority (IBBI) of removal of any partner/ director

21. Valuation STANDARD While conducting the valuation process,
▫ must comply with the applicable valuation standards as notified and modified by CG
▫ May obtain inputs from other valuers too and proper disclosure shall be made in the report
Till such valuation standards are notified
▫ internationally accepted valuation standards or the standards
adopted by any registered valuer organisation shall be applied.

22. Valuation STANDARD issued by icai
1. Preface to the Indian Valuation Standards
2. Framework for the Preparation of Valuation Report in accordance with the Indian Valuation Standards
3. Indian Valuation Standard 101- Definitions
4. Indian Valuation Standard 102- Valuation Bases
5. Indian Valuation Standard Valuation Approaches and Methods
6. Indian Valuation Standard Scope of Work, Analyses and Evaluation
7. Indian Valuation Standard Reporting and Documentation
8. Indian Valuation Standard Business Valuation
9. Indian Valuation Standard Intangible Assets
10. Indian Valuation Standard Financial Instruments

23. Contents of Valuation Report
Sl.
Content 1
background information of the asset being valued; 2
purpose of valuation and appointing authority; 3
identity of the valuer and any other experts involved in the valuation; 4
disclosure of valuer interest or conflict, if any; 5
date of appointment, valuation date and date of report; 6
inspections and/or investigations undertaken; 7
nature and sources of the information used or relied upon; 8
procedures adopted in carrying out the valuation and valuation standards followed restrictions on use of the report, if any; 9
major factors that were taken into account during the valuation; 10
conclusion; and 11
caveats, limitations and disclaimers to the extent they explain or elucidate the limitations faced by valuer, which shall not be for the purpose of limiting his responsibility for the valuation report.

24. Transitional Arrangement
Existing valuation may be rendered without a certificate of registration
▫ upto 31st March, 2018
In case appointment of valuer before such date and the valuation or any part is pending completion before said date
▫ Shall be completed within 3 months thereafter i.e. 30th June, 2018

25. Role of Regd. Valuer (companies act)
Compromise & Arrangement
Corporate Debt Restructuring
Exit to minority shareholders
Winding-up/Liquidation
Further Issue of Shares
Non-cash Transactions with Directors

26. ROLE OF A REGISTERED VALUER
Sl No.
S8ection
Synopsis 1
62(1)(c)–
For Valuing further Issue of Shares 2
192(2)
For Valuing Assets involved in Arrangement of Non Cash transactions involving Directors 3
230(2)(c)(v)
For Valuing Shares, Property and Assets of the company under a Scheme of Corporate Debt Restructuring 4
230(3)
Under a Scheme of Compromise/Arrangement, along with the notice of creditors/ shareholders meeting, a copy of Valuation Report, if any shall be accompanied 5
232(2)(d)
The report of the expert with regard to valuation, if any would be circulated for meeting of creditors/ members 6
232(3)(h)
Where under a Scheme of Compromise/Arrangement the transferor company is a listed company and the transferee company is an unlisted company, for exit opportunity to the shareholders of transferor company, valuation may be required to be made by the Tribunal. 7
236(2)
For Valuing Equity Shares held by Minority Shareholders.
281(1)
For Valuing Assets for submission of report by Liquidator in case of winding up

27. Role of Regd. Valuer (sebi reg.)
SEBI (ICDR), 2009
SEBI (LODR), 2015
SEBI (Mutual Fund) Regulations, 1996
SEBI (Share based Employee Benefits) Regulation, 2014
SEBI (SAST) Regulations, 2011,
SEBI(Delisting) Regulations
ESOP Valuation

28. Role of Regd. Valuer (RBI & fema reg.)
FEMA (Transfer or Issue of Security by a Person Resident Outside India), Regulations, 2017
Foreign Direct Investment (Pricing Guidelines)
Direct Investment by Residents in Joint Venture/ Wholly Owned Subsidiary abroad.
Prudential Norms for Classification, Valuation and Operation of Investment Portfolio by Banks.
Guidelines on Sale of Stressed Assets by Banks,
SARFESI Act, 2002

29. Role of Regd. Valuer (Income tax & others)
Capital Gain on Transfer of Assets
Taxation on Income of Corporate Entities, Partnership
Carry Forward of Losses
Compliance of DTAA Agreements

30. Temporary surrender (Rule 9)
(1) A registered valuer may temporarily surrender his registration certificate in accordance with the bye-laws or regulations, as the case may be, of the RVO and on such surrender, the valuer shall inform the authority for taking such information on record.
(2) a RVO shall inform the authority if any valuer member has temporarily surrendered his/its membership or revived his/ its membership after temporary surrender, not later than seven days from approval of the application for temporary surrender or revival, as the case may be.
(3) every RVO shall place, on its website, in a searchable format, the names and other details of its valuers members who have surrendered or revived their memberships.

31. Punishment for CONTRAVENTION
Section
Provision
Section 469 of Companie s Act,
a contravention thereof shall be-
punishable with fine which may extend to rupees and
where the contravention is a continuing one, with a further fine which may extend to 500 rupees for every day after the first during which such contravention continues
Section 247 of the Companies Act, 2013
Violation of law- Fine of Rs to Rs. 1,00,000
Intention to defraud- Imprisonment of maximum 1 year AND fine of Rs. 1,00,000 to Rs. 5,00,000 (Non Compoundable)
Section 448 of Companie s Act,
In case registered valuer makes a false or immaterial statement, penalty shall be imposed as per Section 447 of the Act. (Rs. 10 Lacs or 1% of TO whichever is lower and imprisonment for not less than 6 months and fine may extend upto 3 times of amount involved in fraud)

32. METHOD OF VALUATION
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

33. Valuation Concept Value-Price Value varies with Not an Exact Science
situation
Not an Exact Science
Subjective
More of an Art
Date Specific

34. Steps in Valuation Obtaining Information Data analysis & review
Discussion with the management of the company
Selection of method
Conducting sensitivities on assumptions
Assigning weights
Recommendation
Reporting

35. Sources of Information
Historical data such as audited results of the company
Management Discussion and Industry Overview
Future projections
Stock market quotations
Representation by the management
Data on comparable companies
Market surveys, news paper reports

36. 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

37. Conclusion Valuers must keep in mind fairness to all stakeholders
Many instances of minority shareholders delaying the merger process by challenging valuation
Balance needs to be achieved through transparency,
fairness and best governance practices

38. hansrajjaria@gmail.com (M) 9836400884
THANK YOU
(M)