The Ministry of Corporate Affairs notified the Companies (Registered Valuers and Valuation) Amendment Rules, 2022, on November 21, 2022, in order to amend the extant Companies (Registered Valuers and Valuation) Rules, 2017[1]. The notion of a “registered valuer” was established with the insertion of Section 247 under the Companies Act, 2013, along with the Companies (Registered Valuers and Valuation) Rules, 2017. Scroll down and check more details regarding Companies (Registered Valuers and Valuation) Amendment Rules, 2022.
Who is a Registered Valuer?
A registered valuer is a professional who can evaluate the value of any property, stocks, shares, debentures, securities/goodwill or any other asset or net worth of the company or its liabilities under the provisions of the Companies Act, 2013.
A registered valuer may be an electrical or mechanical engineer (for valuation of plant and machinery) or a civil engineer or architect (for valuation of land and building) or a chartered accountant (for valuation of securities and other financial assets. A registered valuer should have a minimum of three to five years of valuation experience and a valid certificate of practice to practice as a registered valuer.
The Insolvency & Bankruptcy Board of India (IBBI) and the Registered Valuer Organisation monitor the qualification of a registered valuer.
The Companies Act, 2013 makes it mandatory to have a registered valuer’s report on the valuation of equity shares in the following instances:
- Issuance of new shares, except a rights issue, as per Section 62 of the Companies Act, 2013
- Buyback of shares by all or some of the shareholders under Section 68 of the Companies Act, 2013
- Liquidation of a company under the Insolvency & Bankruptcy Code, 2016.
- Issue of sweat equity and allotment of shares for any other consideration than cash
- Merger, amalgamation or restructuring under Sections 230-232 of the Companies Act, 2013 where the valuation of shares or assets is required.
- Acquisition of shares of minority shareholders by majority shareholders (shareholders holding more than 90% shares of the company) under Section 236 of the Companies Act, 2013.
Moreover, in cases of the right issue under Section 62 or capital reduction of a company under Section 66 of the Companies Act, a valuation report by a registered valuer is advisable.
A Brief on Companies (Registered Valuers and Valuation) Amendment Rules, 2022
The Central Government of India, in exercise of the powers conferred under Section 247 (Valuation by registered valuers) read with Section 458 (Delegation by Central Government of its Powers & Functions), Section 459 (Power of Central Government or Tribunal to Accord Approval) and Section 469 (Power of Central Government to Make Rules) of the Companies Act, 2013, notified the Companies (Registered Valuers and Valuation) Amendment Rules, 2022 on November 21, 2022, to amend the extant Companies (Registered Valuers and Valuation) Rules, 2017.
The Companies (Registered Valuers and Valuation) Amendment Rules, 2022 (2022 rules) have brought a few amendments to the extant 2017 Rules. The amendments are largely brought about to provide clarity and regulate partnership entities or companies already registered or looking to get registered as registered valuers.
- Eligibility of a partnership firm or company to be registered as a registered valuer
The 2022 rules have rectified clause (c) of Rule 3(2) of the 2017 Rules by clarifying that a partnership firm shall not be registered as a registered valuer unless all the partners or directors are eligible to be under Rule 3(1) to be registered as registered valuers. The partners and directors must meet all the requirements necessary to be eligible to be a registered valuer, including being a member of a registered valuers organisation. Clause (f) to Rule 3 (2) has been inserted in this regard.
A proviso has been added that states that such partner or director shall not be a member of more than one registered valuers organisation at one point in time.
A second proviso has been inserted, which provides six months, from the date of commencement of the 2022 Rules, for a partnership entity or company already registered as valuers to comply with the provision of the 2022 Rules.
- Intimation of Changes in Personal Details by Registered Valuer to Authority
Rule 7A has been inserted, which mandates that a registered valuer must inform the requisite authority as to any change in the personal details or modification in the composition of directors or partners or any such change in the partnership deed or Memorandum of Association which may affect the registration of registered valuer. Such intimation must be made by paying the fee as per Table 1 in Annexure-V, inserted by the 2022 Rules.
- Intimation of Change in Composition of Governing Board by Registered Valuers Organizations to Authority
Rule 14A has been inserted, which mandates that the registered valuers organisation must intimate the authority as to any change in the composition of its governing board, appellate panel or committee after payment of fee as per Table-2 of Annexure V as inserted by the 2022 Rules.
- Insertion of Annexure V
Annexure V has been inserted to provide for fee structure to be followed while making intimations as to changes in personal details and changes in the composition of governing board of registered valuers organisations by the registered valuer or registered valuers organisation, as the case may be, to the requisite authority as per Rule 7A and Rule 14A.
- Temporary Surrender of Membership
An explanation has been inserted into Clause 26(1)(b) of Annexure III, Part II of Serial Number IX, which deals with the temporary surrender of membership from a registered valuers organisation when a such member takes up employment. The explanation is inserted to clarify that a member functioning as a whole-time director of a company registered as a valuer shall not be considered “employment” and hence not a ground for the temporary suspension.
- Insertion of Note-2 in Annexure IV
A new note has been inserted under Annexure IV of the 2017 Rules, which deals with the eligibility qualification and experience for registration as a valuer. Note-2 states that in the asset classes of “plant and machinery” and “land and building”, the corresponding nomenclature for engineering and technology graduate and post-graduate courses as provided for in the notification issued by the All-India Council for Technical Education, dated 28 April 2017, shall also be considered while determining the eligibility qualification to be registered as a valuer.
Conclusion
The Central Government notified the Companies (Registered Valuers and Valuation) Amendment Rules, 2022 on November 21, 2022, to amend the extant Companies (Registered Valuers and Valuation) Rules, 2017. The amendment provides further clarity to the functions of registered valuers and registered valuers organisations, especially in connection with partners and partnership entities, directors and companies already registered or looking to be registered as registered valuers.
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