Valuation under FEMA

A Person resident in India who has made ODI in a foreign entity, in case of diminution of such investment where the corresponding original investment is more than USD 10 Million or in case where the amount of such diminution exceeds 20% of the total value of the outstanding dues towards the Indian entity or investor, the diminution in value shall be duly certified on an arm length basis by a Registered Valuer as per the Companies Act, 2013.


The Companies Act, 2013 mandates a valuation report to be obtained by the Company under various provisions of the Act

Issue of Share Capital on Preferential Basis

If any Company proposes to issue new shares on preferential
basis, the price of such shares should be determined by the
valuation report of a Registered Valuer and the price of
shares or other securities to be issued on preferential basis
shall not be less than the price determined on the basis of
the valuation report [Section 62(1)(c)].

Non-cash Transactions Involving Directors

A company could enter into an arrangement by which
a Director of the company or its holding, subsidiary or
associate company or a person connected with him/her
or the company itself acquires / is to acquire assets for
consideration other than cash. In such cases the value of the
assets has to be calculated by a Registered Valuer [Section

Power to compromise or make arrangements with creditors and members (including Merger and Amalgamation of Companies)

In case a compromise or an arrangement is proposed between
a company and its creditors or between a company and its
members, then an application could be made to National
Company Law Tribunal (NCLT) which could order a meeting
of the creditors or members involved in such an arrangement.
The application to the NCLT should include a valuation report
in respect of the shares and property and all assets, tangible
and intangible, movable and immovable, of the company by a
registered valuer [Section 230(2)(v), 230(3) & 232]

Purchase of Minority Shareholding

In case an acquirer or any person becomes a registered
holder of 90 percent or majority of equity share capital of
a company by virtue of an amalgamation, shares exchange,
conversion of securities or by any other reason, then such
a holder should notify the company of its intention to buy
the remaining equity shares (minority shareholders). The
minority shareholders are required to be paid for the equity
shares held by them at a price determined on the basis of
valuation by the registered valuer [Section 236(2)].

Submission of Report by a Company Liquidator

In case the NCLT has made a winding up order or has
appointed a company liquidator, then such a company
liquidator is required to submit a report to the NCLT which
should include the value of the assets held by the company.
The valuation of the assets should be determined by a
registered valuer [Section 281 (1) (a)].

Declaration of Solvency in Case of Proposal to Wind Up Voluntarily

In case of voluntarily winding up of a Company, a
declaration by its directors is required which should
affirm that the full enquiry of the company’s affairs have
been done by them and the company does not have
any debt or they will be able to pay its debts in full
form the proceeds of assets sold in voluntary winding
up. Such a declaration would be valid only if it meets
the prescribed conditions which includes report of the
valuation of the assets of the company prepared by a
registered valuer [Section 305 (2)].