Valuation Requirements

The Companies Act, 2013

Valuation by a Registered Valuer will be required in following situations:

Sections as per Valuation Requirement/ Details Companies Act 2013 Purpose

► If any company proposes to issue new shares (except a rights issue to existing shareholders or to employees

Section 62 (1) (c)* Issue of new shares under employees stock options), the price of such shares should be determined by the valuation report of a Registered Valuer.

► In case of sale or purchase of any asset involving a company and the directors of the company (or its holding, subsidiary or associate company) or a person

Section 192 (2)* Non cash transaction with directors connected with the Director for consideration other than cash, the value of the assets has to be calculated by a Registered Valuer.

► In case of a compromise or arrangement between members (such as in mergers or amalgamations) or with creditors (such as in corporate debt restructuring), a valuation report in respect of shares, property or assets, tangible and intangible, movable and immovable Section 230 (2) & (3) Compromises, Arrangements and of the company, or a swap ratio report by a Registered and Section 232 Amalgamations Valuer is required.

► In case of mergers, the directors are also required to circulate a report to members specifying, inter alia, any special valuation difficulties.

► In case an acquirer or person acting in concert with the acquirer acquire 90% or more of the equity capital in a company, they can offer to the minority shareholder

Section 236 Purchase of minority share holding (or the minority shareholder can offer to the acquirer) to acquire the minority shareholding at a valuation determined by the Registered Valuer.

► A valuation of assets of the company prepared by the Section 281 (1) (a) and

Winding up of a company Registered Valuer is required in case of winding up, Section 305 (2) (d)

voluntarily or otherwise.

*Sections that have been notified as on April 2014

Registered Valuers

Who is a Registered Valuer

► Previously, there was no concept of Registered Valuer under the Companies Act. Only the Income Tax Act and Wealth Tax Act required registration of valuers for valuation of various assets.

► Under the Companies Act 2013, the Central Government (or any authority, institution or agency notified by it) will maintain a register to be called as Register of Valuers.

► The following persons will be eligible to apply for being registered as a valuer.

For Financial Valuation – For Technical Valuation – Chartered accountant, company secretary, cost Members of Institution of Engineers (India), Institute of accountant, retired member of Indian Corporate Law Architects etc. Service or any person holding equivalent Indian or foreign qualification as the Ministry of Corporate Affairs may recognize; and a Merchant Banker employing persons with above qualifications.

► Above identified professionals to be in ‘whole time practice’, implying being engaged in valuation practice for atleast 5 years, either individually or in partnership or in limited liability partnership or being a part of merchant banker.

Who will appoint Registered Valuers

Registered Valuers will be appointed by the audit committee, or in its absence, by the Board of Directors of the company

Relevant experience ► EY has undertaken more than 1000 valuation engagements in

India in the last 5 years.

► EY is the valuer of choice for undertaking valuations for transactions, mergers, related party transactions and similar requirements.

How can EY help

One stop shop Requisite Skills ► EY Merchant Banking Services ► 60 member strong valuation team in India,

Pvt. Ltd. is a Category 1 Merchant Banker. supported by EY’s global valuation practice.

► Team comprises — chartered accountants, ► Cumulative team experience of more than cost accountants, architects and engineers 200 man years. . who can assist in financial or technical valuation.

Ernst & Young LLP

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