Introduction to Registered Valuer

Vijaya Malik| Lloyd Law College| 6th June 2020

Introduction

A registered valuer is a person who performs the valuation of a company’s assets, liabilities, stocks, shares, debentures, goodwill or valuation or property, net worth, etc. The registered valuer is a new concept in the Companies Act. Section 247 which specifies the work, working condition and punishment of registered valuer was inserted in companies act 2013 in the year 2017 and it came to force on 18th October 2017 by Ministry of Corporate Affairs (MOC) and on the same date MOC published ‘the companies (Registered Valuer and Valuation) Rules, 2017’. It contains a set of rules and regulations for the registered valuer. Before the introduction of this section in companies act, the valuation of a company’s stocks, assets, shares, debentures was done by C.A (Charted Accountant) of that company.

But after the introduction, the valuation must be conducted by a professional registered valuer. A registered valuer might be an individual or a company/firm. If a valuer is appointed by a large scale company that has more than 100 crore turnover than it might be possible that the appointed valuer needs an assistant valuer for the valuation of asset and main company’s turnover. According to the rules, the hired Registered Valuer can take input and assistance from another valuer. But he is the one who will be liable and answerable for all the work assigned by the company and he cannot transfer the liability to his assistant. And also, he has to disclose to the company regarding all services which he has received from his assistant. All valuation will be performed by registered valuers under IBC from February 2019.

Examination and License  

According to rule, a person needs to qualify for a valuation examination. Such an exam is conducted by valuation organizations like the Institute of cost and work accountants of India, Institute of Charted Accountants of India, ICAI, Institute of Company Secretary Of India, and an NGO can also become a valuation organization.

According to rule, after passing the exam one needs to apply for the certificate of registration to the authority. 

1. If an individual is applying for a license he has to fill a form ‘A’ and pay a non-refundable amount of rupees 500. And if a company\firm is applying for a license than it has to fill form ‘B’ and pay a non-refundable amount of rupees 1000. 
2. After this, authority examines all the required qualifications and if it finds some defect or requires additional information than the authority gives 21 days to submit the required information. After this, if the authority is satisfied with an application then it grants license within 60 days of submitting an application (excluding 21 days, if taken). And if the authority is not satisfied then it conveys that information within 45 days of submitting the application (excluding 21 days, if taken)

Eligibility of a Registered Valuer:

Qualifications

1. Post Graduation degree with three years of experience
2. Bachelor degree with five-year experience
3. If someone is a member of a professional institute than he requires three years of experience with a Bachelor/Post Graduation degree.

Eligibility/ Valuation Rule

1. Must be a member/recommended by a member of registered valuer organization 
2. Three years of experience after passing the Valuation exam.
3. Indian resident. 
4. Fit and have good character, competence, etc.

Disqualifications

1. To become a valuer, one should not be a minor and a person of unsound mind.
2. A person who is insolvent and he is not yet released from his insolvency.
3. If a person has been ever convicted for 6 months then he will be disqualified from becoming a registered valuer for five years and he will be has been convicted for 7 years he disqualified for a lifetime.
4. If a person has been levied penalty by income tax and proven guilty then he will be disqualified for 5 years. 

Disqualification of a company/firm-

1. If a Firm/company works in multiple directions other than the sole objective of valuation it will be disqualified.
2. It should not be going under any insolvency.
3. At least three partners of a firm or three directors must be Registered Valuers. 

Appointment of Registered Valuer 

A registered valuer is appointed by the Audit Committee of a company. But when we go through Section 177 of the Indian Companies Act it says that only listed companies have an audit committee that means, the applicability of Audit Committee is limited where the company’s turnover is more than 100 crore. So only large scale companies consist of the audit committee. But in absence of audit committee, Board of Directors of that company appoints Registered Valuer according to Section 247 of this act.

According to Section 247(2) of Companies Act, a Registered Valuer must:-

1. He must do a fair impartial and true valuation.
2. He must exercise due diligence, which means he should be a professional.  
3. He must do valuation as per the valuation rule.

A registered valuer needs to be independent and fair. He should not pursue any personal interest whether it is direct or indirect. According to the rules, he must not have any interest in the last three years before the appointment for this post and after three years of delivering his service. He will not eligible for the post of registered valuer if he has any personal interest. 

Punishment 

If the valuer has not followed the procedure and rules of valuation then he will be liable under Section 247(3) and punished with fine of minimum twenty-five thousand and maximum one lakh rupees. And if he has contravened the rules intending to commit fraud to the respected company than he is liable under Section 247(3) of Companies Act with imprisonment up to one year along with fine of minimum one lakh rupees and maximum 5 lakh rupees. After being liable under Section 247(3) the person needs to refund all the remuneration paid to him by a company and also has to pay for all the damages done by him to the respected company.