1. Valuation under the Companies Act, 2013

A. Section 62(1)(c) – Preferential Issue of Further Shares.

As per Section 62(1) (c), for preferential allotment of shares, company has to follow rule 13 also. As per rule 13 of the Companies Act, the price of the shares or other securities to be issued on a preferential basis, either for cash or for consideration other than cash, shall be determined on the basis of valuation report of a registered valuer.

B . Section 192(2)- Non Cash Transactions Involving

Section 192(2) provides that the notice for approval of the resolution by the company or holding company in general meeting under sub-section (1) shall include the particulars of the arrangement along with the value of the assets involved in such arrangement duly calculated by a registered valuer.

C. Section 230(1), 230(3), 232(3)(h) – Compromise or Arrangements

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

D. Section 232 – Mergers and amalgamations

The report of the Registered Valuer with regard to valuation, if any, would be circulated for meeting of creditors/Members. The Valuation report to be 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

E. Section 236 – Purchase of minority shareholding:- 

Section 236(2) of the Act provides that the acquirer, person or group of persons under sub-section (1) shall offer to the minority shareholders of the company for buying the equity shares held by such shareholders at a price determined on the basis of valuation by a registered valuer in accordance with such rules as may be prescribed.

F. Section 281 – Submission of report by Company Liquidator. 

Section 281 (1) of the Act provides that where the Tribunal has made a winding up order or appointed a Company Liquidator, such liquidator shall, within sixty days from the order, submit to the Tribunal, a report containing the nature and details of the assets of the company including their location and value, stating separately the cash balance in hand and in the bank, if any, and the negotiable securities, if any, held by the company.

The valuation of the assets shall be obtained from registered valuers for this purpose.

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

Issue of Sweat Equity Shares – This rule applies to all companies except listed companies issuing sweat equity shares to its directors or employees. The rule prescribes that the sweat equity shares shall be issued at a price determined by a registered valuer as the fair price giving justification for such valuation.

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

Allotment of Shares in consideration for Other than Cash – In the case of securities (not being bonus shares) allotted as fully or partly paid up for consideration other than cash, there shall be attached to the Form PAS-3 a copy of the contract, duly stamped. A report of a registered valuer in respect of valuation of the consideration shall also be attached along with the contract.

2. Valuation under the Insolvency and Bankruptcy Code, 2016

a. Power to compromise or make arrangements with creditors and members.

Regulation 27 read with regulation 35 of the IBBI (Insolvency Resolution Process for corporate persons) Regulations, 2016- Under this regulation, after the initiation of Corporate Insolvency Resolution Process (CIRP) by the National Company Law Tribunal (NCLT), an insolvency professional (IP), within 7 days of their appointment, must appoint 2 registered valuers to determine the fair value and liquidation value. The registered valuer must determine the fair and liquidation value of the corporate debtor within 7 days of their appointment but not later than 47 days.

b. Corporate Debtor undergoing Liquidation.

Regulation 35 of the IBBI Regulations, 2016– This resolution states, if  the valuation of the corporate debtor’s assets was not carried out during the Corporate insolvency Resolution Process, the liquidator must appoint two registered valuers to determine the actual value of the assets or businesses as described in clauses (a) to (f) of Regulation 32 of the corporate debtor.

c. Corporate Debtor undergoing Fast Track Corporate Insolvency Resolution Process.

Regulation 26 of the IBBI (Fast Track Insolvency Resolution Process for Corporate Persons) Regulations, 2017- This regulation states that the resolution professional must appoint 1 registered valuer within 7 days of their appointment to determine the fair and liquidation value of the corporate debtor.

d. Corporate Debtor undergoing Voluntary Liquidation.

Section 59(3)(b)(ii) of the Insolvency and Bankruptcy Code, 2016- Under this section, in the case of voluntary liquidation of corporate persons or when a proposal to wind down the company has been made, the declaration of insolvency must be accompanied with a valuation report issued by a registered valuer.

e. Individual Guarantors to Corporate Debtors and other individuals.

Regulation 30 of the IBBI (Bankruptcy Process for Personal Guarantors to Corporate Debtors) Regulations, 2019- This Regulation states that the bankruptcy trustee must appoint a registered valuer to evaluate the assets (which may not be part of the bankrupt’s estate) if they deemed it necessary or if the committee has passed a resolution to that effect.

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

In an application for avoiding a transaction at undervalue, The Adjudicating Authority may require an independent expert to assess evidence relating to the value of the transactions.

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

The Declaration of Insolvency given by Directors shall be accompanied with the Valuation report issued by Registered Valuer.

Note: 1) SEBI Laws includes many rules & regulations which prescribes Merchant banker to carry out valuation, however recently those are amended to recognize Registered Valuer (as per companies Act 2013).

2) It also may be noted that Registered Valuers means valuers registered with IBBI. Hence while approaching Valuers, please check whether the proposed valuer has registration number allotted IBBI.