The Ministry of Corporate Affairs has issued a notification dated October 20, 2017 to bring into effect Section 247 of the Companies Act, 2013, which deals with valuation by Registered Valuers. In addition to notifying the commencement of this provision, MCA has also notified the Companies (Registered Valuers and Valuation) Rules, 2017 (hereinafter referred to as the ‘Rules’) simultaneously.
The valuation of a business can prove to be a key factor for taking strategically important business decisions. A valuer shall be required to conduct valuation required under the Act as per the Rules and may conduct the valuation as per the Rules if required under any other law or by any other regulatory authority. These rules inter alia provide that for the valuation to be conducted, a valuer has to be registered with the authority specified by the Central Government.
The eligibility for registered valuers has also been provided for under the rules which are required to be fulfilled in order to be eligible to be a registered valuer. Further, these rules prescribe the minimum requirements, qualifications and experience required to be a Registered Valuer. This shows that the Government has envisioned to regulate the valuation process as a professional practice. Also, it is not compulsory for every valuer or a person eligible to be a valuer to be registered as a Valuer after successfully passing the Valuation examination.
The rules have provided a transition period as well to fulfill the requirements as mandated by the MCA. As per the rules, a person who may be rendering valuation services under the Act, on the date of commencement of these Rules, may continue to render valuation services without a certificate of registration up till March, 2018.
Further, the Central Government has also delegated its powers and functions vested in under Section 247 of the Companies Act, 2013, related to valuation any property, stocks, shares, debentures, securities or goodwill or any other assets by Registered Valuers to the Insolvency and Bankruptcy Board of India.
Even though before notification of these provisions and rules independent valuers used to function, however, valuation is still a relatively new field of profession as it lacked regulatory control and set standards until now. Also, since there was lack of a regulatory control, there used to be difference in assumptions taken for valuation by different valuers. The valuation will now be done in accordance with Valuation Standards and unless they are notified, it shall be done in accordance with the International Valuation Standards 2017, which have been issued by International Valuation Standards Council (IVSC).
The introduction of these provisions and rules would not only ensure a streamlined methodology but would also ensure an increase in the standard of professional judgment used in valuation process. This would also lead to valuation being a specialized profession.