Introduction
With the introduction of the Companies Act, 2013 (“New Act”), many new concepts have been added in Corporate Law. One such new introduction is the concept of Registered Valuer. While, Companies Act, 1956 (“Old Act”) did provide that valuation of assets in various circumstances was required to be done by a Chartered Accountant, now, the New Act requires such valuation to be done by a Registered Valuer. With the insertion of the concept of Registered Valuer, the responsibility as well as liability of the person conducting the valuation has increased manifold. The various provisions of the New Act relating to the Registered Valuer have been explained under this article.
Appointment of Registered Valuer
The New Act provides for valuation of property, stock, shares, debentures, securities or goodwill or any other assets or the net worth of the company or its liabilities, under various sections of the New Act to be valued by a person who has such qualifications and experience as prescribed and who has been registered as a Valuer under the provisions of the law. Such Valuer will be appointed by the Audit Committee or in its absence by the Board of Directors of the Company.
Role of the Registered Valuer
- For further Issue of Shares to any persons u/s 62(1)(c), when such issue of shares is authorized by a special resolution, the price of such shares is required to be determined by a registered valuer.
- Under Section 192 of the New Act, a company can enter into a non-cash transaction with its director only on passing of a resolution in the general meeting. The notice for approval of the resolution shall include, amongst other things, value of the assets involved in such arrangement, duly calculated by a registered valuer.
- A company, along with its application u/s 230 (1) to the Tribunal, for compromise or arrangement with its creditors or members, amongst other things, shall disclose a valuation report in respect of shares and property and all assets, tangible and intangible, movable and immoveable, of the company by a registered valuer.
- The offer for purchase of minority shares u/s 236(1) by an acquirer, person or group of persons shall be at a price which is determined on the basis of valuation by a registered valuer.
- Where the Tribunal has made a winding up order or appointed a company liquidator, such liquidator shall submit to the Tribunal, within 60 days, a report u/s 281 containing, amongst other particulars, the nature and details of the assets of the company including their location and value. The value shall be arrived at from the valuation report of a registered valuer.
- In case of voluntary winding up of a company, the directors of such company shall made a declaration u/s 305 (1). Such declaration, amongst other details, shall contain the report of valuation of the assets of the company prepared by a registered valuer.
Duties of the Registered Valuer
The Valuer appointed for the above role shall
- Make an impartial true and fair valuation of any assets which may be required to be valued,
- Exercise due diligence while performing the functions as valuer,
- Make the valuation in accordance with such rules as may be prescribed, and
- Not undertake valuation of any assets in which he has a direct or indirect interest or becomes so interested at any time during or after the valuation of assets.
Penalty and Imprisonment
Valuation of assets is a crucial matter for the company, for which various aspects need to be taken into account. Not only the current stakeholders, but also the proposed stakeholders rely on the disclosures related to valuations to assess the risk associated with the company. Hence, impartial valuation by the Registered Valuer, taking into account all the relevant criteria is a must. To ensure such impartial and true and fair valuation, the following provisions have been introduced:
- On contravention of the provisions relating to valuation by registered valuers, the valuer shall be punishable with a fine>= Rs 25,000/-, but <= Rs 1,00,000
- On contravention of the provisions relating to valuation by registered valuers, with the intention to defraud the company or its members, the valuer shall be punishable with
- Imprisonment which may extend to 1 year
- Fine >= Rs 1,00,000/- but <= Rs 5,00,000/-
- When the valuer is convicted for contravention of the provisions relating to valuation, he shall be liable to
- Refund, to the company, the remuneration received by him and
- Pay for damages to the company or to any other person for the loss arising out of incorrect or misleading statements of particulars made in the report.