1 November, 2017
On October 18, 2017, the Ministry of Corporate Affairs (“MCA”) notified Section 247 of the Companies Act, 2013 (“Notification”) pertaining to valuation of property, shares or stocks of a Company by registered valuers (“Registered Valuers”). Simultaneous with this section coming into force, the MCA also notified the Companies (Registered Valuers and Valuation) Rules, 2017 (“Rules”). As per Section 247 read with the Rules, any valuation of any property, shares, stocks of a Company, shall now be conducted by a Registered Valuer in accordance with the Rules.
Object: The Rules primarily regulate (a) the process / eligibility criterion for obtaining a certificate of registration as a Registered Valuer and (b) the conduct of valuation.
The Rules state that a committee will be set up to specify valuation standards that will be applicable to companies and Registered Valuers. Further, until such valuation standards are notified or modified by the Central Government, the Rules prescribe that the valuer shall make valuations as per (a) internationally accepted valuation standards; or (b) valuation standards adopted by any registered valuers organization. In addition, Rule 8(3) of the Rules also stipulate the information required to be included by the valuer in the valuation report.
Transition Period: The Rules have allowed for a transition period of upto March 31, 2018 for registration of valuation professionals as Registered Valuers. Further, if any company has appointed any valuer before March 31, 2018 or any part of the valuation has not been completed prior to March 31,2018, then the valuer shall complete such valuation or such part within three months thereafter.
Impact: (a) As a result of these Rules, relevant provisions requiring valuations of property or shares by valuers as per the Act (including any preferential allotment of shares by a Company) is be required to be conducted by a Registered Valuer, in accordance with the Rules, after the Transition Period; and (b) The Notification will also be applicable to REITs and INVITs, where valuation reports are required to be obtained from a Registered Valuer.
For more information, please contact:
Sameer Sibal, Partner, Jerome Merchant + Partners
sameer.sibal@jmp.law
