“Knowing what business is worth and what determines its value is prerequisite for intelligent decision making” – Warren Buffet
Credible valuations are critical to the efficient working of the capital markets, businesses, government and all its stakeholders. With growing shareholder activism, importance of independent valuations is arising all over the world including India.
Business/Asset valuation is critical for strategic business decisions including fund raising, M&A, Sale/Liquidation of businesses, Strategic business decisions like Family or Shareholders disputes, Voluntary value assessment or may be just to comply with certain regulatory or accounting requirements in India under RBI, Income Tax, Companies Act, SEBI Laws etc. Better Corporate Governance is also leading to requirement of independent Business Valuations.
Different Regulators in India have prescribed different valuation methodologies for different purposes. More recently, a few regulators have prescribed Fair Value methodology to be computed as per internationally accepted valuation guidelines. However in most of the cases, there is neither any guidance on the basis for selection of a particular methodology nor much of details on its manner of application including its technical nitty-gritties.
Valuation in itself is an evolving in India and is an inexact science. Professional judgement of valuer is thus critical in any valuation exercise. However till now due to lack of Indian Valuation Standards and absence of any Regulatory Authority to control, guide and develop the practice of valuation in India, different valuers have been taking different assumptions leading to drastic differences in value conclusion. In many cases, the valuation also lacks uniformity and generally accepted global valuation practices.
With above background, the Companies Act, 2013 (Act) had brought the concept of Registered Valuers to regulate the practice of Valuation in India and to standardize the valuation in line with International standards. However the valuer’s qualification, experience, manner and process was left to be decided by the Rules.
After about 4 years, the Ministry of Corporate Affairs (MCA) has now issued the Companies (Registered Valuers and Valuation) Rules, 2017 (Rules) on 18th October, 2017. Simultaneously, section 247 of the Act has now come into force w.e.f. 18th October 2017.
These rules contain various aspects pertaining to Registered Valuers including:
- Who can become Valuer (including Qualification, experience and clearance of Valuation examination) for each Asset Class and the process involved;
- Eligibility and Role of Registered Valuers Organisation (RVO) for conducting educational courses, granting membership, conducting training, laying code of conduct, monitoring the functioning of valuers and addressing grievances including conducting disciplinary proceedings against valuers who are its members;
- The Valuation Standards required to be adhered to while performing and reporting;
- Contents of the Valuation Report including permissible caveats and limitations;
- Professional competence and Due Care and Independence of Valuer;
- Maintenance of record of each assignment for minimum 3 years and
- Regulation of the profession including Model code of conduct for Registered Valuers
The Registered Valuer under Companies Act, 2013 shall specifically do valuation of asset classes as required under the Act. However it is also clarified under the rules that the Registered Valuer provisions shall not automatically become applicable to valuation required under any other law (like RBI, Income Tax, SEBI etc).
Accordingly, as of now, the Registered Valuer provisions shall cover the following Acts/Regulations - Companies Act, 2013, Insolvency Code, 2016 and SEBI (REIT and InvIT) Regulations, 2016. However in times to come it is expected that other Regulators would also align their Act/Rules with these Registered Valuer provisions.
Though the Valuation Standards would also be framed shortly however it’s high time that Professionals interested in practicing in this field to come forward and gain academic and practical knowledge of Business valuation principles and concepts, valuation approaches and methodologies in general and also as prescribed under various statutes like Income Tax, RBI and SEBI for different purposes, valuation case laws, ICAI business valuation standard, ICAI Technical guide on Share Valuation, erstwhile CCI guidelines, guidance from Revenue Ruling 1959-60 (USA) and international valuation standards, 2017 issued by International valuation standards council.
It is emphasise that though these rules have opened the doors of this profession to a wider set of professionals including Graduate in Civil Engineering, Architecture or Town Planning for Land and Building, Mechanical/Electrical engineers for Plant & Machinery (besides other organisations as may be prescribed) and a member of a Professional Institute including CA, CS and CMA for Financial Assets, however it must be remembered that it is a very onerous task and has come with lot of responsibilities as it now stands Regulated by the government.
However our understanding of Valuation says that though we can make the valuation process more codified and scientific however Valuation will always involve judgement based on experience of the valuers and would still be based upon the “assumptions” and “limiting conditions” based on the “data” available on a “valuation date”. Accordingly, what the Registered Valuers law is now telling us is essentially to learn, assess, analyse, document and disclose with transparency.
SECTION 247 OF THE ACT: REGISTERED VALUERS
Section 247 of the Act states that a Registered Valuer would carry out valuation in respect of any property, stocks, shares, debentures, securities or goodwill or any other assets or net worth of a company or its liabilities and that the valuer shall have such qualifications and experience and *being a member of an organisation recognised, on such terms and conditions as may be prescribed.
The Registered Valuer shall be appointed by the audit committee or in its absence by the Board of Directors of that company.
Regarding the functioning and duties of the Registered Valuer, it is stated that the Registered valuer shall-
(a)make an impartial, true and fair valuation of any assets which may be required to be valued;
(b)exercise due diligence while performing the functions as valuer;
(c)make the valuation in accordance with such rules as may be prescribed; and
(d)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.
There is a specific sub section dealing with the punishment and liability of the valuers which states that upon contravention of any provisions of Registered Valuer provisions-
The Registered Valuer shall be punishable with fine which shall not be less than twenty-five thousand rupees but which may extend to one lakh rupees:
However if the valuer has contravened such provisions with the intention to defraud the company or its members, he shall be punishable with imprisonment for a term which may extend to one year and with fine which shall not be less than one lakh rupees but which may extend to five lakh rupees.
Where a valuer has been convicted under these provisions, he shall be liable to-
(i) refund the remuneration received by him to the company; and
(ii) pay for damages to the company or to any other person for loss arising out of incorrect or misleading statements of particulars made in his report.
Merely by reading of Section 247 of the Act, dealing with Registered Valuers, it is clear that intention of the government has been to regulate the practice of valuation as a Professional practice and all applicable restrictions including that of eligibility, appointment, independence, exercising due care and levy of penalty including payment of damages and also imprisonment in case of intention to defraud has been provided for
The Rules have now elaborated each of the above points of the Act in a detailed manner.
*as clarified vide MCA notification dated 23rd October 2017
SPECIFIC PROVISIONS UNDER THE COMPANIES ACT, 2013 WHICH REQUIRES VALUATION REPORT FROM A REGISTERED VALUER
|1||62(1)C||Valuation report for Further Issue of Shares|
|2||192(2)||Valuation of Assets Involved in Arrangement of Non cash transactions involving Directors|
|3||230(2)(c)(v)||Valuation of shares, property and assets of the Company under a scheme of Corporate Debt Restructuring|
|4||230(3)||Valuation report along with Notice of creditors/shareholders meeting –Under scheme of compromise/Arrangement|
|5||232(2(d)||The report of the expert with regard to valuation, if any, would be circulated for meeting of creditors/Members|
|6||232(3)(h)||The Valuation report to be made by the tribunal for exit opportunity to the shareholders of transferor Company –Under the scheme of Compromise/Arrangement in case the Transferor company is Listed Company and the Transferee-company is an unlisted Company|
|7||236(2)||Valuation of equity shares held by the Minority Share Holders|
|8||281(1)||Valuing assets for submission of report by liquidator|
REGISTERED VALUER UNDER THE INSOLVENCY CODE INSOLVENCY AND BANKRUPTCY BOARD OF INDIA REGULATIONS, 2016 WHICH REQUIRES VALUATION REPORT FROM A REGISTERED VALUER
Under Insolvency Code and Insolvency and Bankruptcy Board of India Regulations, 2016 - Registered Valuer means a person registered as such in accordance with the Companies Act, 2013 and rules made thereunder
REGISTERED VALUER UNDER THE SEBI (REIT AND INVIT) REGULATIONS, 2016 WHICH REQUIRES VALUATION REPORT FROM A REGISTERED VALUER
Under SEBI (REIT and InvIT) Regulations, 2016 “valuer” means any person who is a "registered valuer" under section 247 of the Companies Act, 2013 and who has been appointed by the manager to undertake valuation of the REIT assets
COMPANIES (REGISTERED VALUERS AND VALUATION) RULES, 2017 (RULES)
- “*authority” means an authority specified by the Central Government under section 458 of the Companies Act, 2013 to perform the functions under these rules;
- “asset class” means a distinct group of assets, such as land and building, machinery and equipment, displaying similar characteristics, that can be classified and requires separate set of valuers for valuation;
- “certificate of recognition” means the certificate of recognition granted to a registered valuers organisation under sub-rule (5) of rule 13 and the term “recognition” shall be construed accordingly;
- “certificate of registration” means the certificate of registration granted to a valuer under sub-rule (6) of rule 6 and the term “registration” shall be construed accordingly;
- “registered valuers organisation” means a registered valuers organisation (RVO) recognised under sub-rule (5) of rule 13;
- “valuation standards” means the standards on valuation referred to in rule 18; and
- “valuer” means a person registered with the authority in accordance with these rules and the term “registered valuer” shall be construed accordingly.
*Vide MCA notification dated 23rd October 2017, Central Government has delegated its powers for Registered Valuers to the Insolvency and Bankruptcy Board of India (IBBI)
RULE 3 : ELIGIBILITY FOR REGISTERED VALUERS
A “person” shall be eligible to be a Registered Valuer if he-
- is a valuer member of a RVO
- possesses the qualification and experience specified in rule 4
- has passed the Valuation Examination under rule 5 within three years preceding the date of making an application for registration under rule 6:
- is a person resident in India
- is a fit and proper person
For determining whether an individual is a fit and proper person, the authority may take into consideration any criteria including integrity, reputation and character, absence of convictions and restraint orders and competence and financial solvency
For Registration as Valuer of an asset class, a person need to possess qualifications and experience and also has to pass the valuation examination
No partnership entity or company shall be eligible to be a registered valuer if-
- it has been set up for objects other than for rendering professional or financial services, including valuation services and that in the case of a company, it is not a subsidiary, joint venture or associate of another company or body corporate;
- it is undergoing an insolvency resolution or is an undischarged bankrupt;
- all the partners or directors, as the case may be, are not ineligible under clauses (c), (d), (e), (g), (h), (i), (j) and (k) of sub-rule (1);
- three or all the partners or directors, whichever is lower, of the partnership entity or company, as the case may be, are not registered valuers; or
- none of its partners or directors, as the case may be, is a registered valuer for the asset class, for the valuation of which it seeks to be a registered valuer.
For valuing each class of assets (Land and Building, Plant and Machinery and Securities and Financial Assets), now there is a need to appoint Valuer Registered under each class of Assets.
In case a firm/company intends to be Registered as Valuer, its object must be for rendering professional or financial services including valuation services.
Further, in case a firm/company intends to be Registered as Valuer, and has more than 2 Partners/Directors, minimum 3 of them need to be Registered as Valuers. This may create practical difficulties for firms/companies doing valuation practice in a firm/company along with other professional services and may lead to carve out of valuation services in a separate entity.
Also, in case a company intends to be Registered as Valuer, it should not be a subsidiary, joint venture or associate of another company or body corporate.
RULE 4 : QUALIFICATION AND EXPERIENCE
An individual shall have the following qualifications and experience to be eligible for registration under rule 3, namely:-
(a) post-graduate degree or post-graduate diploma, in the specified discipline, from a University or Institute established, recognised or incorporated by law in India and at least three years of experience in the specified discipline thereafter; or
(b) a Bachelor’s degree or equivalent, in the specified discipline, from a University or Institute established, recognised or incorporated by law in India and at least five years of experience in the specified discipline thereafter; or
(c) membership of a professional institute established by an Act of Parliament enacted for the purpose of regulation of a profession with at least three years’ experience after such membership and having qualification mentioned at clause (a) or (b).
Explanation-I.─ For the purposes of this clause the ‘specified discipline’ shall mean the specific discipline which is relevant for valuation of an asset class for which the registration as a valuer or recognition as a registered valuers organisation is sought under these rules.
Explanation-II.─ Qualifying education and experience and examination or training for various asset classes, is given in an indicative manner in Annexure–IV of these rules.
Summary of Annexure –IV
|Asset Classes||Qualification||Experience||Valuation Examination|
|Land and Building||Graduate in Civil Engineering, Architecture or Town Planning of a recognised university||5 year of experience in discipline after completing graduation||As per Rule 5|
|Post Graduate in Civil Engineering, Architecture or Town Planning of a recognised university||3 year of experience in discipline after completing post-graduation||As per Rule 5|
|Graduate in a discipline specified by the Authority for a RVO in its conditions of recognition and Post Graduate in Valuation of land and building or real estate from a recognised university||5 year of experience in discipline after completing post-graduation||As per Rule 5|
|Plant and Machinery||Graduate in Mechanical or Electrical Engineering of a recognised university||5 year of experience in discipline after completing graduation||As per Rule 5|
|Post Graduate in Mechanical or Electrical Engineering of a recognised university||3 year of experience in discipline after completing post-graduation||As per Rule 5|
|Graduate in Valuation of machinery and plant from recognised university and Post Graduate in Valuation of machinery and plant from recognised university||3 year of experience in discipline after completing post-graduation||As per Rule 5|
|Securities or Financial Assets||Graduate in any stream and
Member of Professional Institute (CA/CS/CMA) or MBA/PGDBM specialisation in finance or Post graduate degree in Finance
|3 year of experience in discipline after completing graduation||As per Rule 5|
|Any other graduate or post graduate level qualification as may be specified by Authority||5 year and 3 year of experience in case of graduate level degree and post graduate level degree respectively||As per Rule 5|
As per the qualification criteria, the Graduates in the stream of engineering are permitted to be Registered as Valuers for Land and Building and Plant and Machinery.
However for valuation of Security and Financial Assets, members of Professional Institute (CA/CS/CMA) who are also Graduates in any stream are eligible.
Regarding a case of members of Professional Institute who are not Graduates, the MCA need to clarify their eligibility to be Registered Valuers. One view is that considering them at least equivalent to Graduates, they may be specified by the Authority under Rule 4(b).
RULE 5 : VALUATION EXAMINATION
The authority shall, either on its own or through a designated agency, conduct valuation examination for one or more asset classes, for individuals, who possess the qualifications and experience as specified in rule 4, and have completed their educational courses as member of a registered valuers organisation, to test their professional knowledge, skills, values and ethics in respect of valuation:
Provided that the authority may recognise an educational course conducted by a registered valuers organisation before its recognition as adequate for the purpose of appearing for valuation examination:
Provided also that the authority may recognise an examination conducted as part of a master’s or post graduate degree course conducted by a University which is equivalent to the valuation examination.
It is mandatory for all eligible persons to pass the Valuation examination for being Registered as a Valuer under these rules.
RULE 6 : APPLICATION FOR CERTIFICATE OF REGISTRATION
(1) An individual eligible for registration as a registered valuer under rule 3 may make an application to the authority in Form-A of Annexure-II along with a non-refundable application fee of five thousand rupees in favour of the authority.
(2) A partnership entity or company eligible for registration as a registered valuer under rule 3 may make an application to the authority in Form-B of Annexure-II along with a non-refundable application fee of ten thousand rupees in favour of the authority.
If the authority is satisfied, after such scrutiny, inspection or inquiry as it deems necessary, that the applicant is eligible under these rules, it may grant a certificate of registration to the applicant to carry on the activities of a registered valuer for the relevant asset class or classes in Form-C of the Annexure-II within sixty days of receipt of the application
RULE 7 : CONDITIONS OF REGISTRATION
The valuer shall –
- At all times possess the eligibility qualification and experience
- At all times comply with provisions of the Act, these Rules and internal regulations of the respective RVO
- Not conduct valuation of assets other than for which he/it has been registered
- Maintain records of all assignments undertaken by him for at least 3 years from the completion of such assignments
- Comply with code of conduct of the RVO
- Allow only the partner/Director who is a Registered valuer for the asset class that is being valued to sign and act on behalf of it
- in case a partnership entity or company is the registered valuer, it shall disclose to the company concerned, the extent of capital employed or contributed in the partnership entity or the company by the partner or director, as the case may be, who would sign and act in respect of relevant valuation assignment for the company;
- in case a partnership entity/company is the registered valuer, be liable jointly and severally along with the partner/director who signs and acts in respect of a valuation assignment on behalf of the partnership entity/company;
The Valuer has to comply with the Act, Rules and also with the bye laws and code of conduct of the RVO
Maintain records of all Valuation assignments for 3 years
The Valuation report can be signed only by the Partner/Director who is a Registered Valuer for the class of asset being valued
RULE 8 : CONDUCT OF VALUATION
The registered valuer shall, while conducting a valuation, comply with the valuation standards as notified or modified under rule 18:
Provided that until the valuation standards are notified or modified by the Central Government, a valuer shall make valuations as per-
(a) internationally accepted valuation standards;
(b) valuation standards adopted by any registered valuers organisation.
The registered valuer may obtain inputs for his valuation report or get a separate valuation for an asset class conducted from another registered valuer, in which case he shall fully disclose the details of the inputs and the particulars etc. of the other registered valuer in his report and the liabilities against the resultant valuation, irrespective of the nature of inputs or valuation by the other registered valuer, shall remain of the first mentioned registered valuer.
The valuation shall now be conducted based on the Valuation Standards. Unless these standards are made, the valuation shall be done as per internationally accepted valuation standards.
There are International Valuation Standards, 2017 issued by the International Valuation Standards Council (IVSC) which may be relied upon. Further the existing regulatory provisions prescribed by other regulators including Income Tax, RBI, SEBI and the Valuation reports and Fairness Opinions on Scheme of Arrangement (available in public domain) may be reviewed.
In case a valuer has taken registration for one of the class of assets, but the assignment requires valuation of other class of assets as well, he/it may get valuation of other class of assets from another Registered valuer but it shall be fully disclosed and the liabilities, if any against the resultant valuation shall remain with the first mentioned registered valuer. Accordingly outsourcing of Valuation assignments would be done carefully after proper understanding of credentials of the other valuer.
CONTENTS OF VALUATION REPORT
The valuer shall in his report state the following
- Background information of the asset being valued
- Purpose of Valuation and Appointing authority
- Identity of Valuer and any other experts involved in valuation
- Disclosure of Valuer interest/conflict, if any
- Date of appointment, valuation date and date of report
- inspections and/or investigations undertaken;
- Nature and sources of the information used or relied upon;
- Procedures adopted in carrying out the valuation and the valuation standards followed
- Restrictions on use of the report, if any;
- Major factors that were taken into account during the valuation
- Conclusion and
- Caveats, Limitations and Disclaimers to the extent they explain or elucidate the limitations faced by valuer, which shall not be for the purpose of limiting his responsibility for the valuation report.
The model code of conduct further states that the valuer shall exercise due diligence and ensure proper care is taken while exercising professional judgement.
Now Valuers cannot disclaim their liability for their expertise by giving caveats in their report. They will be held accountable for the assumptions and decisions pertaining to the Valuation exercise. However it has been clarified that the assumptions are based by the statement of facts provided by the company or information available in public domain and not generated by the valuer.
It is further stated in the model code that the valuer shall maintain written records for any decision taken, reasons for it along with the information and evidence in its support.
Accordingly all valuations would now have to follow a detailed process and thus serious professionals with inclination in valuation and finance should enter this profession.
RULE 10 : FUNCTIONS OF A VALUER.
A valuer shall conduct valuation required under the Act as per these rules and he may conduct valuation as per these rules if required under any other law or by any other regulatory authority.
RULE 11 : TRANSITIONAL ARRANGEMENT
Any person who may be rendering valuation services under the Act, on the date of commencement of these rules, may continue to render valuation services without a certificate of registration under these rules upto 31st March, 2018:
Provided that if a company has appointed any valuer before such date and the valuation or any part of it has not been completed before 31st March, 2018, the valuer shall complete such valuation or such part within three months thereafter.
Explanation.─ It is hereby clarified that conduct of valuation by any person under any law other than the Act, or these rules shall not be effected by virtue of coming into effect of these rules unless the relevant other laws or other regulatory bodies require valuation by such person in accordance with these rules in which case these rules shall apply for such valuation also from the date specified under the laws or by the regulatory bodies.
It is clarified that the Registered Valuer provisions only cover the valuation required under the Act. However other regulatory authorities may direct for valuation as per Registered Valuer rules under their statutes/regulations. Till that time, the valuation as per other Law/Regulations like Income Tax, RBI, SEBI etc shall take place as it is and Registered Valuer provisions would not automatically become applicable on them.
RULE 12 : ELIGIBILITY FOR REGISTERED VALUERS ORGANISATIONS (RVO)
(1) An organisation that meets requirements under sub-rule (2) may be recognised as a registered valuers organisation for valuation of a specific asset class or asset classes if ─
(i) it has been registered under section 25 of the Companies Act, 1956 (1 of 1956) or section 8 of the Companies Act, 2013 (18 of 2013) with the sole object of dealing with matters relating to regulation of valuers of an asset class or asset classes and has in its bye laws the requirements specified in Annexure-III;
(ii) a professional institute established by an Act of Parliament enacted for the purpose of regulation of a profession;
(iii) the organisations may also be recognised as a registered valuers organisation for valuation of a specific asset class or asset classes even if they are: (a) an organisation registered as a society under the Societies Registration Act, 1860 or any relevant state law, or; (b) an organisation set up as a trust governed by the Indian Trust Act, 1882 provided that they convert into a company under section 8 of the companies act, 2013 and include the prescribed requirements of the model bye laws within one year from the date of commencement of these rules.
The RVO shall be recognised if it conducts educational courses in valuation and which includes practical training, grants membership or certificate of practice in respect of valuation of asset class, conducts training before certificate of practice is issued, lays down and enforces a code of conduct, provides continuing education, monitors and reviews the functioning including quality of service, has a mechanism to addressing grievances and conducting disciplinary proceedings against valuers who are its members.
For Securities and Financial Assets, all the three Professional institutes (CA/CS and CMA) are expected to get registered as a RVO.
However the institutes would have to conduct educational courses in valuation including practical training, training, CPE and monitoring of quality of valuation services.
As of now, CA, CS and CMA Institutes have a Certificate course on Valuation and certificate is given after attending its classes and clearing a Valuation exam and submission of project report. However ICSI and ICWAI would have to build its capacity further for their members to get engaged in niche Valuation profession.
Similar registrations would be taken by the Institution of Valuers, Institution of Engineers etc. for covering the valuation of Plant and Machinery and Land and Building.
RULE 13 : APPLICATION FOR RECOGNITION AS RVO
An eligible organisation which meets the conditions specified in rule 12 may make an application for recognition as a registered valuers organisation for asset class or classes to the authority in Form-D of the Annexure-II alongwith a non-refundable application fee of rupees one lakh in favour of the authority.
If the authority is satisfied, after such scrutiny, inspection or inquiry as it deems necessary that the applicant is eligible under these rules, it may grant a certificate of recognition as a registered valuers organisation in Form-E of Annexure-II.
RULE 14 : CONDITIONS OF RECOGNITION AS RVO
The recognition granted under rule 13 shall be subject to the conditions that the registered valuers organisation shall-
(a) at all times continue to satisfy the eligibility requirements specified under rule 12;
(b) maintain a register of members who are registered valuers, which shall be publicly available;
(c) admits only individuals who possess the educational qualifications and experience requirements, in accordance with rule 4 and as specified in its recognition certificate, as members;
(d) make such reports to the authority as may be required by it;
(e) comply with any directions, including with regard to course to be conducted by valuation organisation, issued by the authority;
(f) be converted or registered as company under section 8 of the Act, with governance structure and bye laws, within a period of one year from the date of commencement of these rules if it is an organisation referred to in proviso to sub-rule (1) of rule 12;
(g) shall have the governance structure and incorporate in its bye laws the requirements specified in Annexure-III within one year of commencement of these rules if it is an organisation referred to in clause (i) of sub-rule (1) of rule 12 and existing on the date of commencement of these rules;
(h) display on its website, the status and specified details of every registered valuer being its valuer members including action under rule 17 being taken against him; and
(i) comply with such other conditions as may be specified by authority.
RULE 15 : CANCELLATION OR SUSPENSION OF CERTIFICATE OF REGISTRATION OR RECOGNITION
The authority may cancel or suspend the registration of a valuer or recognition of a registered valuers organisation for violation of the provisions of the Act, any other law allowing him to perform valuation, these rules or any condition of registration or recognition, as the case may be in the manner specified in rule 17.
RULE 16 : COMPLAINT AGAINST A REGISTERED VALUER OR REGISTERED VALUERS ORGANISATION
A complaint may be filed against a registered valuer or registered valuers organisation before the authority in person or by post or courier along with a non-refundable fees of rupees one thousand in favour of the authority and the authority shall examine the complaint and take such necessary action as it deems fit: Provided that in case of a complaint against a registered valuer, who is a partner of a partnership entity or director of a company, the authority may refer the complaint to the relevant registered valuers organisation and such organisation shall handle the complaint in accordance with its bye laws.
RULE 18 : VALUATION STANDARDS
The Central Government shall notify and may modify (from time to time) the valuation standards on the recommendations of the Committee set up under rule 19.
RULE 19 : COMMITTEE TO ADVISE ON VALUATION MATTERS.
The Central Government may constitute a Committee to be known as “Committee to advise on valuation matters” to make recommendations on formulation and laying down of valuation standards and policies for compliance by companies and registered valuers.
RULE 20 : PUNISHMENT FOR CONTRAVENTION
Without prejudice to any other liabilities where a person contravenes any of the provision of these rules he shall be punishable in accordance with sub-section (3) of section 469 of the Act.
Section 469 (3) of the Act provides for punishment with fine which may extend to five thousand rupees and where the contravention is a continuing one, with a further fine which may extend to five hundred rupees for every day after the first during which such contravention continues.
RULE 21 : PUNISHMENT FOR FALSE STATEMENT
If in any report, certificate or other document required by, or for, the purposes of any of the provisions of the Act or the rules made thereunder or these rules, any person makes a statement,—
(a) which is false in any material particulars, knowing it to be false; or
(b) which omits any material fact, knowing it to be material, he shall be liable under section 448 of the Act.
Section 448 of Act states that if in any certificate or report is issued under the Act which is either false in material particulars or omits any material fact, knowing it to be material, it shall be treated as “Fraud” and be punishable with -
Imprisonment for a term which shall not be less than six months but which may extend to ten years and shall also be liable to fine which shall not be less than the amount involved in the fraud, but which may extend to three times the amount involved in the fraud:
Provided that where the fraud in question involves public interest, the term of imprisonment shall not be less than three years.
Explanation.—For the purposes of this section-
“fraud” in relation to affairs of a company or any body corporate, includes any act, omission, concealment of any fact or abuse of position committed by any person or any other person with the connivance in any manner, with intent to deceive, to gain undue advantage from, or to injure the interests of, the company or its shareholders or its creditors or any other person, whether or not there is any wrongful gain or wrongful loss;
ANNEXURE I : MODEL CODE OF CONDUCT FOR REGISTERED VALUERS
Integrity and Fairness
- A valuer shall, in the conduct of his/its business, follow high standards of integrity and fairness in all his/its dealings with his/its clients and other valuers.
- A valuer shall maintain integrity by being honest, straightforward, and forthright in all professional relationships.
- A valuer shall endeavour to ensure that he/it provides true and adequate information and shall not misrepresent any facts or situations.
- A valuer shall refrain from being involved in any action that would bring disrepute to the profession.
- A valuer shall keep public interest foremost while delivering his services.
Professional Competence and Due Care
- A valuer shall render at all times high standards of service, exercise due diligence, ensure proper care and exercise independent professional judgment.
- A valuer shall carry out professional services in accordance with the relevant technical and professional standards that may be specified from time to time
- A valuer shall continuously maintain professional knowledge and skill to provide competent professional service based on up-to-date developments in practice, prevailing regulations/guidelines and techniques.
- In the preparation of a valuation report, the valuer shall not disclaim liability for his/its expertise or deny his/its duty of care, except to the extent that the assumptions are based on statements of fact provided by the company or its auditors or consultants or information available in public domain and not generated by the valuer.
- A valuer shall not carry out any instruction of the client insofar as they are incompatible with the requirements of integrity, objectivity and independence.
- A valuer shall clearly state to his client the services that he would be competent to provide and the services for which he would be relying on other valuers or professionals or for which the client can have a separate arrangement with other valuers.
Independence and Disclosure of Interest
- A valuer shall act with objectivity in his/its professional dealings by ensuring that his/its decisions are made without the presence of any bias, conflict of interest, coercion, or undue influence of any party, whether directly connected to the valuation assignment or not.
- A valuer shall not take up an assignment if he/it or any of his/its relatives or associates is not independent in terms of association to the company.
- A valuer shall maintain complete independence in his/its professional relationships and shall conduct the valuation independent of external influences.
- A valuer shall wherever necessary disclose to the clients, possible sources of conflicts of duties and interests, while providing unbiased services.
- A valuer shall not deal in securities of any subject company after any time when he/it first becomes aware of the possibility of his/its association with the valuation, and in accordance with the Securities and Exchange Board of India (Prohibition of Insider Trading) Regulations, 2015 or till the time the valuation report becomes public, whichever is earlier.
- A valuer shall not indulge in “mandate snatching” or offering “convenience valuations” in order to cater to a company or client’s needs.
- As an independent valuer, the valuer shall not charge success fee.
- In any fairness opinion or independent expert opinion submitted by a valuer, if there has been a prior engagement in an unconnected transaction, the valuer shall declare the association with the company during the last five years.
- A valuer shall not use or divulge to other clients or any other party any confidential information about the subject company, which has come to his/its knowledge without proper and specific authority or unless there is a legal or professional right or duty to disclose.
- A valuer shall ensure that he/ it maintains written contemporaneous records for any decision taken, the reasons for taking the decision, and the information and evidence in support of such decision. This shall be maintained so as to sufficiently enable a reasonable person to take a view on the appropriateness of his/its decisions and actions.
- A valuer shall appear, co-operate and be available for inspections and investigations carried out by the authority, any person authorised by the authority, the registered valuers organisation with which he/it is registered or any other statutory regulatory body.
- A valuer shall provide all information and records as may be required by the authority, the Tribunal, Appellate Tribunal, the registered valuers organisation with which he/it is registered, or any other statutory regulatory body.
- A valuer while respecting the confidentiality of information acquired during the course of performing professional services, shall maintain proper working papers for a period of three years or such longer period as required in its contract for a specific valuation, for production before a regulatory authority or for a peer review. In the event of a pending case before the Tribunal or Appellate Tribunal, the record shall be maintained till the disposal of the case. Gifts and hospitality.
- A valuer or his/its relative shall not accept gifts or hospitality which undermines or affects his independence as a valuer. Explanation.─ For the purposes of this code the term ‘relative’ shall have the same meaning as defined in clause (77) of Section 2 of the Companies Act, 2013.
- A valuer shall not offer gifts or hospitality or a financial or any other advantage to a public servant or any other person with a view to obtain or retain work for himself/ itself, or to obtain or retain an advantage in the conduct of profession for himself/ itself. Remuneration and Costs.
- A valuer shall provide services for remuneration which is charged in a transparent manner, is a reasonable reflection of the work necessarily and properly undertaken, and is not inconsistent with the applicable rules.
- A valuer shall not accept any fees or charges other than those which are disclosed in a written contract with the person to whom he would be rendering service. Occupation, employability and restrictions.
- A valuer shall refrain from accepting too many assignments, if he/it is unlikely to be able to devote adequate time to each of his/ its assignments.
- A valuer shall not conduct business which in the opinion of the authority or the registered valuer organisation discredits the profession.