Statutory Requirements for Valuation: Role of an IBBI Registered Valuer
Valuation plays a critical role in the financial ecosystem, especially in transactions involving mergers, acquisitions, restructuring, or insolvency proceedings. In India, valuation has become more structured and regulated under different laws to ensure transparency and credibility. One of the key aspects of this framework is the introduction of the IBBI Registered Valuer, a professional recognized under the Companies Act and other legislations for conducting valuations.
Why Valuation Matters in Corporate and Legal Processes
Valuation is not only about determining the worth of a business or asset; it provides a reliable basis for decision-making. Whether it is raising capital, restructuring debt, issuing shares, or handling insolvency cases, a fair and transparent valuation is mandatory to protect the interests of stakeholders. Some key purposes for valuation include:- Determining the fair value of shares and securities.
- Assessing assets during mergers and acquisitions.
- Supporting insolvency resolution plans.
- Compliance with accounting standards and regulatory requirements.
Legal Framework Governing Valuation in India
Different legislations in India specify situations where valuation must be conducted by a professional. These include:1. Companies Act, 2013
The Companies Act makes it mandatory to use a registered valuer for specific purposes such as:- Issue of Shares: Valuation is required for preferential allotment and rights issue.
- Mergers & Amalgamations: Determining swap ratios and share exchange values.
- Buy-back of Shares: Assessing the fair value of securities.
- Employee Stock Options (ESOPs): Determining the fair market value of shares offered.
2. Insolvency and Bankruptcy Code (IBC), 2016
Under the IBC, valuation is essential for preparing resolution plans and liquidation processes. An IBBI Registered Valuer is appointed to determine the fair value and liquidation value of assets, which plays a crucial role in maximizing recovery for creditors.3. SEBI Regulations
The Securities and Exchange Board of India (SEBI) also requires valuation in cases such as:- Pricing of shares during IPOs and delisting.
- Valuation of assets in Real Estate Investment Trusts (REITs) and Infrastructure Investment Trusts (InvITs).
- Compliance with takeover and buy-back regulations.
4. Income Tax Act, 1961
For taxation purposes, valuation is required to determine the fair market value of assets during transactions like transfer of shares, international taxation (transfer pricing), and capital gains.5. FEMA (Foreign Exchange Management Act)
In cross-border transactions, valuation is necessary to ensure compliance with FEMA guidelines. For example, pricing of shares issued to or transferred by foreign investors must be supported by valuation reports from a recognized professional.Who Can Be an IBBI Registered Valuer?
The Insolvency and Bankruptcy Board of India (IBBI) regulates and registers valuers under three broad asset classes:- Securities or Financial Assets
- Land and Building
- Plant and Machinery
- Have relevant qualifications (CA, CMA, CS, MBA Finance, or engineering background depending on the asset class).
- Complete a 50-hour training program from a Registered Valuer Organization (RVO).
- Clear the IBBI Valuation Examination.
- Obtain registration with IBBI after meeting experience and compliance criteria.
Why Only an IBBI Registered Valuer Can Conduct Statutory Valuations
The concept of registered valuers was introduced to standardize the valuation process and ensure accountability. An IBBI Registered Valuer is bound by:- Code of Conduct issued by IBBI.
- Valuation Standards notified by the Ministry of Corporate Affairs.
- Professional liability for accuracy and fairness in reporting.
Importance of Compliance with Statutory Requirements
For companies and businesses, following the statutory framework is not just a legal necessity but also a matter of credibility. Non-compliance with valuation requirements can lead to:- Regulatory penalties.
- Tax disputes.
- Investor dissatisfaction.
- Delays in transactions like mergers or acquisitions.
Key Takeaways
- Valuation is a critical element in corporate transactions, insolvency proceedings, and taxation matters.
- Multiple laws such as the Companies Act, IBC, SEBI regulations, Income Tax Act, and FEMA mandate valuation by registered professionals.
- An IBBI Registered Valuer brings transparency, compliance, and credibility to the process.
- Engaging a registered valuer protects companies against regulatory risks and builds investor confidence.
IBBI Registered Valuer Services (Securities or Financial Assets – SFA):
| Firm Name | Akshay Sane & Associates |
|---|---|
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Office Address |
A5/12, Potnis Parisar, Karvenagr, Pune – 411052 |
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Contact Person |
CA Akshay Sane |
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Contact No. |
9960125781 |
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Email id
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info@akshaysane.com
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Website
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www.akshaysane.com |
I am a Registered Valuer for Securities or Financial Assets (SFA) under the Insolvency and Bankruptcy Board of India (IBBI), providing independent, objective, and technically sound valuation services in compliance with the Companies Act, 2013, and IBC, 2016.
Our valuation reports are prepared in accordance with Valuation Standards prescribed by ICAI and IBBI, and are accepted by regulators, financial institutions, investors, and statutory authorities.
Scope of Registered Valuer Services:
- Valuation under Companies Act, 2013:
- Valuation for preferential allotment, rights issue, ESOPs, sweat equity
- Valuation for mergers, demergers, slump sales, and business transfers
- Valuation for buy-back of shares or exit under Section 66
- Valuation for Startups & Private Equity:
- Determination of fair market value for fundraising
- Pitch valuation and consulting for early-stage startups and angel investors
- Business valuation for ESOP pricing, shareholder restructuring, or entry/exit events
- Valuation of Convertible Instruments:
- Valuation of optionally or compulsorily convertible preference shares, debentures, and other hybrid securities
- Pricing under FEMA/FDI norms and RBI-compliant valuation certificates
- Valuation under IBC:
- Valuation of securities and financial assets in cases of CIRP (Corporate Insolvency Resolution Process), liquidation, and voluntary liquidation
- Preparation of valuation reports as per Regulation 35 of the IBBI (Insolvency Resolution Process for Corporate Persons) Regulations, 2016
- Working closely with Resolution Professionals, Committee of Creditors (CoC), and NCLT requirements
- Valuation for Foreign Equity – Fresh Issue & Transfers:
- Share valuation for international transactions and arm’s length documentation
- FEMA, SEBI, and RBI-related valuation requirements (e.g., FCGPR, FCTRS filings)
- Valuations under Income Tax Act:
- Valuation for share transfers under rule 11UA
- Determination of full value of consideration in case of slump sale