Valuation under Companies Act, 2013

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VALUATION UNDER COMPANIES ACT, 2013

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

1. Further Issue of Share Capital on preferential basis under Section 62 (1)(c) of The Companies Act, 2013 read with Rule 13 of Companies (Share Capital and Debentures) Rules, 2014

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.

2. Non-cash Transactions involving Directors under Section 192 (2) of The Companies Act, 2013

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 on 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.

3. Power to compromise or make arrangements with creditors and members (Including Merger and Amalgamation of

Companies) under Section 230 (2) (v), 230 (3) & 232 of The Companies Act, 2013 read with Rule 6 of Companies (Compromises, Arrangements and Amalgamations) Rules, 2016

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.

Purchase of Minority Shareholding under Section 236 (2) of The Companies Act, 2013 read with Rule 27 of Companies (Compromises, Arrangements and Amalgamations) Rules, 2016

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.
Submission of report by a company liquidator under Section 281 (1) (a) of The Companies Act, 2013

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.
Declaration of solvency in case of proposal to wind up voluntarily under Section 305 (2) of The Companies Act, 2013
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.
Security for companies inviting secured public deposits under Rule 6 of Companies (Acceptance of Deposits) Rules, 2014
In case a company is inviting secured deposits and provides for security by way of a charge on its assets as referred to in
Schedule III of the act excluding Intangible Assets of the company for the repayment of the amount of deposit and interest thereon, such issue of secured deposits shall not exceed the value of relevant assets. Such a valuation is required to be conducted by a registered valuer.

Valuation for the purpose of issue of Sweat Equity under Rule 8 of Companies (Share Capital and Debentures) Rules, 2014

A company other than a listed company, which is not required to comply with the Securities and Exchange Board of India Regulations on sweat equity, shall not issue sweat equity shares to its directors or employees at a discount or for consideration other than cash, for their providing know-how or making available rights in the nature of intellectual property rights or value additions.

The sweat equity shares to be issued shall be valued at a price determined by a registered valuer as the fair price giving justification for such valuation.

The valuation of intellectual property rights or of know how or value additions for which sweat equity shares are to be issued, shall be carried out by a registered valuer, who shall provide a proper report addressed to the Board of directors with justification for such valuation.
Provision of money by company for purchase of its own shares by employees or by trustees for the benefit of employees under Rule 16 of Companies (Share Capital and Debentures) Rules, 2014

An Unlisted company may make a provision of money for the purchase of, or subscription for, its shares or its holding company, if the purchase of, or the subscription for, the shares by trustees is for the shares to be held by or for the benefit of the employees of the company. The valuation at which shares are to be purchased shall be determined by a registered valuer.

Valuation under SARFAESI Act, 2002

As per SARFAESI Act, 2002 and Rule 8(5) of Security In- terest (Enforcement) Rules, 2002, before affecting sale of immovable property, authorised officer is required to obtain valuation of property from an approved valuer. With its partners being ‘Registered Valuers’ under Wealth Tax Act, 1957, AAA Valuation Professionals (I) LLP may be appointed for the valuation of Mortgaged Immovable & Move- able Assets for the purpose of fixing their Reserve Price for auction by Banks, Financial Institutions & NBFCs

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