COMPANIES (REGISTERED

VALUERS AND VALUATION)

RULES, 2017

CA MADHUSUDAN KUMAR PODDAR

FCA, Insolvency Professional, DISA, DIRM, Certification in MSME(IIBF), B.com (H)
 Provision under different statute deals with
Valuation from Registered valuers
• Companies Act:-
– Section 62 (Further issue of share capital)
– Section 192 (Restriction on non-cash transactions involving directors.)
– Section 230 (Power to compromise or make arrangements with creditors and
members)
– Section 236 (Purchase of minority shareholding)
– Section 281 (Submission of report by Company Liquidator)

• The Securities and ExchangeBoard of India (Real Estate Investment Trusts)

Regulations, 2014 - SEBI (REIT) Regulations
• The Securities and Exchange Board of India (Infrastructure
Investment Trusts) Regulations, 2014 - SEBI (InvIT) Regulations
• Insolvency and Bankruptcy Code, 2016
 Regulatory Framework
• Section 247 of Companies Act, 2013 (effective from 18-
October-2017)

• Companies (Registered Valuers and Valuation) Rules,

2017

• Model code of conduct for registered valuers (See clause (g)

of rule 7 and clause (d) of sub-rule (2) of rule 12)

• Valuation Standards (Yet to be announced, except ICAI

RVO)
SECTION 247 OF COMPANIES ACT
 Sub Section (1)

To be valued by Registered Valuer

appointed by the audit committee or in its absence by the Board of Directors

of that company.
 Sub Section (2)- Duties & Obligation
Valuer should :-
 make an Impartial, true and fair valuation
 Exercise due diligence 
 Make valuation in accordance with prescribed rules
 Not have direct or indirect interest or becomes so interested at any
time during a period of three years prior to his appointment
as valuer or three years after the valuation of assets was conducted
by him (---3 year prior---Valuer Appointment date—Conduct of
Valuation----3 year after)

Analysis:- Subsection (2) provides broader level details about the

professional obligation of Valuer. Rules, code of conduct, Valuation
standard provides micro level of details.
 Sub Section (3) & (4)
Punishment u/s 247(3) & (4)-

• Get triggered if – Valuer contravenes the provisions of this section or the

rules.
• Penalty for contravention- 25000 – 1 lac

• Intential contravention to defraud the company or its members:-

• Imprisonment-  for a term which may extend to Maximum one year.
• Fine- 1 lac- 5lac
• Refund of remuneration- refund the remuneration received by him to the company
• Damages-  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.

Analysis:- Section 247 (3) & (4) provides for consequence of contravention of this
section or Rules. These sub section should also be read with Rule 15,16, 17, rule
20 and Rule 21 to have an holistic view on consequences of contravention.
Companies (Registered Valuers and
Valuation) Rules, 2017
 Chapters

MODEL CODE OF CONDUCT FOR

ANNEXURE-I REGISTERED VALUERS Form For
A Application for registration as a valuer by an individual
ANNEXURE-II VARIOUS FORMS Application for registration as a valuer by a partnership
B entity/Company
Governance Structure and Model Bye Laws C CERTIFICATE OF REGISTRATION
ANNEXURE - III for registered valuers organisation D Application for Recognition by RVO
Eligibility Qualification and Experience for CERTIFICATE OF RECOGNITION REGISTERED VALUERS
ANNEXURE - IV Registration as Valuer E ORGANISATION 
 Preliminary (Rule 1-2)
• Rule 1 (Analysis)-
– This rule apply on Valuation of any assets/liability of company under Companies act.
– The explanation provides that conduct of valuation under any other act shall not be affected
by virtue of coming into effect of these rules.

• Rule 2 (Definition)-
– Authority- means an authority specified by the Central Government under section 458 of
CA 2013. (C. Gov has specified IBBI as the authority. )
– registered valuers organization- means a registered valuers organization recognized under
sub-rule (5) of rule 13;
– Asset class- means a distinct group of assets displaying similar characteristics, requires
separate set of valuers for valuation. (IBBI has prescribed 3 class of assets being L&B, P&M,
Security & Financial Assets.)
– Certificate of recognition- means the certificate of recognition granted to a RVO under rule
13.
– Valuer- means a person registered with the authority in accordance with these rules and the
term "registered valuer" shall be construed accordingly.
– Certificate of registration- means the certificate of registration granted to a valuer under
rule 6.
– valuation standards means the standards on valuation referred to in rule 18.
REGISTERED VALUER AND THEIR REGISTRATION
 Eligibility for RV as per Rule 3
Individual Firm/LLP/Company
Should not be:- (Unfit person) • Should not be:- (Unfit Entity)
• An undercharged Insolvent/applied for being • undergoing an insolvency resolution or is an
adjudicated as insolvent undischarged bankrupt.
• Unsound mind person • Any partner/director is individually ineligible.
• Minor • A subsidiary/JV/Associate of any body corporate.
• Non-resident of India (As per FEMA)
• Convicted for :- Should be:-
– Offence of moral turpitude/Offence punishable>6 month- • Objective of the entity is to provide
disqualified for 5 year from expiry of sentencement period Professional/financial Service including Valuation
– Offence with jail > 7 year- life long disqualified Service.
• levied a penalty under section 271J of Income-tax • three or all the partners or directors, whichever is
Act, 1961 and time limit to file appeal expire. lower should be registered valuer.
• Atleast one partner/director should be registered
Should be:- valuer for assets class for which firm/company seek
• A valuer member of RVO registration.
• Recommended for registration by RVO
• Possess qualification as per rule 4
• Passed Valuation examination with in 3 year
preceding to application for registration.
• Fit and proper person
 Qualification as per Rule 4
EDUCATIONAL QUALIFICATION
• Post-graduate degree/diploma, in the specified discipline from
University/Institute established/ recognised by law in India + 3 YEAR EXPERIANCE

• Bachelor's degree, in the specified discipline from University/Institute

established/ recognised by law in India + 5 YEAR OF EXPERIENCE
•  
• Membership of professional  institute  established by an Act of Parliament
(Example-ICAI/ICSI/ICWAI) + 3 YEAR EXPERIENCE AS MEMBER

• Annexure-IV provides Eligibility Qualification and Experience for Registration as

Valuer.
• As per annexure IV, the eligibility qualification means qualification obtained from a
recognized Indian University or equivalent Institute whether in India or abroad.
 Application (rule-6)
Apply in Form A (Fee 5,000), Form B (Fee 10,000- For Firm/Co)

Board may require further detail/physical hearing/presence,

correction of defect, 21 days shall be granted.
 
COR in Form C in 60 days of Receipt of application. (rule 6(6))
 
In case board feel registration should not be granted, SCN with in 45
days, applicant to reply in 15 days. Final Order of Board and
communication in 30 days of receiving the reply.
 
 COR Valid for any time until cancelled.  
 Condition of Registration(Rule-7)
Individual
• At all times possess the eligibility and
qualification and experience criteria as
specified under rule 3 and rule 4 Unsound
mind person.
• comply with the Code of Conduct (as
per Annexure-I) (Clause 7(g))
• At all times comply with the provisions of
the Act , these rules and the Bye-laws or
internal regulations of RVO.
• Take prior permission of the authority (IBBI)
for shifting his/ its membership from one
RVO to another.
• Take adequate steps for redressal of
grievances.
• Maintain records of each assignment
undertaken by him for at least three years
from completion of assignment.
• • Company to be liable along with director who signs
Not to conduct valuation of the assets or
class(es) of assets other than for which he/it
has been registered by the authority ;
Firm/LLP/Company
• Allow only the partner or director who is a registered valuer for
the asset class(es) that is being valued to sign and act on behalf of
it.
• Disclose to the company concerned, the extent of capital
employed or contributed in the partnership entity or the company
by the partner or director who would sign and act in respect of
relevant valuation assignment for the company.
• Immediately inform the authority on the removal of a partner or
director, as the case may be, who is a registered valuer along with
detailed reasons for such removal; and
Firm/LLP
• Firm liable jointly and severally along with the
partner who signs and acts in respect of a valuation
assignment on behalf of the partnership entity
Company
and acts in respect of a valuation assignment on
behalf of the company
REGISTERED VALUER ORGANISATION
 Eligibility for registered valuers organizations- Rule 12
Should be:-
• Either a
– registered under section 25 of the Companies Act, 1956 or
– section 8 of the Companies Act, 2013 or
– it is a professional institute established by an Act of Parliament enacted for the purpose of regulation of a profession (If
not a section 8 company, need to convert in to section 8 company with in 1 year from rule commencement)
• has in its bye laws the requirements specified in Annexure-III
• sole object of dealing with matters relating to regulation of valuers

Additional Eligibility as per model bye law:-

• Section 8 company with with share capital
• not under the control of person(s) resident outside India (not more than forty-nine per cent. of its share capital is held,
directly or indirectly, by persons resident outside India)
• not a subsidiary of a body corporate through more than one layer
• itself, its promoters, its directors and persons holding more than ten percent. of its share capital are fit and proper
persons.

Functional Criteria:-
• Conducts educational courses in valuation
• Grants membership or certificate of practice
• Conducts training for the individual members
• Provides for continuing education
• Enforces a code of conduct for members which includes all the provisions specified in Annexure-I (Clause 12(2)(d))
• Monitors and reviews the functioning, including quality of service, of members
• Mechanism to address grievances and conduct disciplinary proceedings against members.
Application for recognition by RVO – Rule 13

Apply in Form D (Fee 1 Lac)

Board may require further detail/physical hearing/presence, correction

of defect, 21 days shall be granted.
 
COR in Form E. (No 60 Days criteria) (rule 13(5))
 
In case board feel registration should not be granted, SCN with in 45
days, applicant to reply in 15 days. Final Order of Board and
communication in 30 days of receiving the reply.
 
 COR Valid for any time until cancelled.  
 Condition for recognition of RVO – Rule 14
• At all times continue to satisfy the eligibility requirements specified under rule 12.

• Comply with any directions, including with regard to course to be conducted by valuation
organization under clause (a) of sub-rule (2) of rule 12, issued by the authority.

• Make such reports to the authority as may be required by it.

• Admits only individuals who possess the educational qualifications and experience
requirements, in accordance with rule 4

• Maintain a register of members who are registered valuers, which shall be publicly available.

• Display on its website, the status and specified details of every registered valuer.

• Shall have the governance structure and incorporate in its bye laws the requirements
specified in Annexure-III .
Some key points of Annexure III- Model Bye law of RVO
• The registered valuers organization shall publish its bye-laws, the composition of all committees
formed, and all policies created under the bye-laws on its website.
• AMENDMENT OF BYE-LAWS- Resolution to be passed by the directors 75% voting in favor.
• Passed resolution to be filed with the authority within seven days from the date of its passing, for
its approval.
• Amendments to the bye-laws shall come into effect on the seventh day of the receipt of the
approval.

• More than half (>50%) of the directors- RESIDENT IN INDIA

• More than half (>50%) of the directors- INDIPENDENT
• Not more than one fourth (<25%) of the directors-REGISTERED VALUER
• No meeting of the Governing Board- without the presence of at least one independent director.
• Independent director- Must not be shareholder, registered valuer, fulfill 149(3) requirement.
• Chairperson of the Governing Board- Independent director
• Rounding off- >half- next higher number, not > one fourth- next lower number

• COMMITTEE:- Advisory Committee, Membership Committee, Monitoring Committee, Grievance

Redressal Committee (Min 3 member), Disciplinary Committee (Min 1 member nominated by
Authority)
• Chairperson of each committee- Independent Director
• The rejection of the membership application shall be communicated to the applicant
stating the reasons for such rejection, within thirty days of the receipt of the application.
• An applicant aggrieved of a decision rejecting his application may appeal to the
Membership Committee of the Organization within thirty days from the receipt of such
decision.
• The Membership Committee shall pass an order disposing of the appeal in the manner it
deems expedient, within thirty days of the receipt of the appeal.
• The Organization may require the members to pay a fixed sum of money as its annual
membership fee.

• Any order passed by the Disciplinary Committee shall be placed on the website of the
Organization within seven days from passing of the said order.
•  Any person aggrieved of an order of the Disciplinary Committee may prefer an appeal
before the Appellate Panel within thirty days from the receipt of a copy of the final order.
• The Appellate Panel shall dispose of the appeal in the manner it deems expedient, within
thirty days of the receipt of the appeal.

• A member shall make an application for temporary surrender of his membership of the
Organization at least thirty days before
• Upon acceptance of such surrender of his membership, and completion of thirty days from
the date of such acceptance, the name of the member shall be struck from the registers of
the Organization, and the same shall be intimated to the authority.
CANCELLATION AND SURRENDER
 CANCELLATION, SUSPENSION - Rule 15, 16 & 17
Rule 16- Complain against R. Valuer/RVO
• A complain may be filed before the authority (IBBI) in person or by post or courier
• with a non-refundable fees of rupees one thousand.
• Authority (IBBI) shall
• examine the complaint and take such necessary action as it deems fit.
• refer the complaint to the relevant RVO to handle in accordance with its bye laws in case of Complaint made against a RV who is
partner/Director of a company/firm.

Rule- 15- The authority (IBBI) may 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,
cancel or suspend the registration/Recognition as the case may be in the manner specified in rule 17.

Rule- 17- Procedure to be followed by IBBI

By authorized officer (Officer authorized by IBBI).

Based on the findings of an inspection or investigation, or a complaint received or on material available on record
Issue of SCN (in writing)– By Registered Post/Electronic means
Principle of natural justice to be followed
Order may provide for- No Action, Warning,  suspension or cancellation, Change of one or more partner/director
For order of cancelling the recognition of RVO, order  shall specify the time within which its members may take
membership of another RVO without prejudice to their registration.
order passed published on the website of the authority.
Order not effective until thirty days have elapsed from the date of issue of the order unless otherwise specified.
Any person aggrieved by an order of the authorized officer under sub-rule (5) may prefer an appeal before the
authority.
 Temporary Surrender of Registration (Rule-
9)
• In accordance with the bye-laws or regulations of RVO.

• Valuer :- to Inform the authority (IBBI) for taking such

information on record.

• RVO:-
– To inform the authority (IBBI) if any valuer member has temporarily
surrendered his/its membership or revived his/ its membership after
temporary surrender with in 7 days of approval of application.
– place, on its website, in a searchable format, the names and other
details of its valuers members who have surrendered or revived their
memberships.
 Contravention- Rule 20 & 21
Rule-20 – For any contravention of this rules:-
Person shall be punishable in accordance with sub-section (3) of section
469 of the Act. (Rs. 5000, plus Rs. 500/day in case of continuing default).

Rule-21 – Intentional material false statement/omission:-

Person shall be liable under section 448 of the Act.

Analysis:- Section 247 (3) (4) already provides for consequence of

contravention by registered Valuer. Rules should be read together with
section 247.
CONDUCT OF VALUATION AND VALUATION
STANDARDS
 Conduct of Valuation & Valuation std- Rule 8, 18, 19
• Rule 8-
– The registered valuer shall comply with valuation standards as notified or modified under rule 18.
– Untill notified as per (a) internationally accepted valuation standards;(b) valuation standards adopted by
any registered valuers organization.
– The registered valuer may use the valuation report of other registered valuer in which case he shall fully
disclose particulars in in his report. Use of others report shall not rule the liability of valuer.
– Rule 8 Also specify matter to be included in valuation report.

• Rule 19- Committee to advise on valuation matters :-

– “Committee to advise on valuation matters" to make recommendations on :-
– formulation of valuation standards and
– policies for compliance by companies and registered valuers.
• Committee To be constituted by Central government.
• Members:-
 One member nominated by MCA
7  One member nominated by IBBI
 one member nominated by the Legislative Department
 4 representative of  authorities which are allowing valuations by registered valuers (Like SEBI)
7  President of ICAI/ICWAI/ICMAI as ex officio member AS EX OFFICIO
2  4 representative of RVO
 two members to represent industry and other stakeholder nominated by the Central Government
• Chairperson who shall be a person of eminence, maximum 2 tenure, one tenure of 3 year.

Rule 18- Valuation standard:- 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.
 Valuation Examination- Rule 5
• The authority (IBBI)shall:-,
– either on its own or
– through a designated agency (NISM),
conduct valuation examination for one or more asset classes.

• Exam to be appeared by:-

• individuals, who possess the qualifications and experience as specified in rule 4, and
• have completed their educational courses as member of a registered valuers organization
• An individual may appear for the valuation examination any number of times.

• Syllabus:-
• Authority (IBBI) may determine syllabus based on recommendation of one or more Committee of experts
constituted by the authority in this regard.
• The syllabus shall be published on the website of the authority at least three months before the examination.

• Approval and recognition of Education course :-

– Authority (IBBI) may recognize an educational course conducted by a RVO as adequate for the purpose of
appearing for valuation examination.

• Recognition of equivalent exam:-

• Authority (IBBI) may recognize 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.
Some Confusing MCQ- Section 247 and Rules