The ministry of corporate affairs has revamped the rules governing entities that determine the valuation of corporate assets, such as plants, machinery, securities, and goodwill, for improving ease of doing business and for greater regulatory oversight.
The Companies (registered valuers and valuation) Amendment Rules 2022 issued on Tuesday, also brought clarity on the valuation standards used by professionals, as they play an important role in corporate restructuring, mergers and acquisitions, and bankruptcy resolutions. Such transactions are dependent on the assessment of these assets and liabilities and are key to due diligence. Fair assessment of the corporate assets and liabilities is crucial to avoiding litigation.
According to the new amendments, no partnership entity or company shall be eligible to be a registered valuer if it is not a member of a registered valuer organization.
Besides, it stipulates that the entities must not be registered with more than one valuer organization at a given time. Registered valuer organizations offer educational courses for individuals and register them as valuers. The Insolvency and Bankruptcy Board of India (IBBI) recognizes the courses and is the designated authority for governing such professionals.
“Restricting the registration of a valuer to a registered valuer organization at a given point in time will help have an effective disciplinary mechanism," said a person in the know seeking anonymity.
A partnership or company registered as a valuer will get six months to comply with the new rules, he said. The Centre has clarified that valuers may follow either the internationally-accepted valuation standards or valuation standards adopted by a registered valuer organization.
“The amendments in valuation rules sought to clarify the standards used by the valuers to conduct valuations. At present, valuers were facing ambiguity in following the specific internationally-accepted valuation standards and valuation standards adopted by respective registered valuers organisations in the absence of specific directions. The new rules have clarified that the valuers can follow either one of them," said Amit Maheshwari, tax partner, AKM Global, a tax consulting firm.
Besides, the government also clarified that though a registered valuer will not be allowed to take up employment, they will be allowed to hold the designation of whole-time directors. The clarifications will help improve and strengthen the valuation practice in the country, Maheshwari said.
Registered valuers have to intimate IBBI about any change in their internal structure and changes in the partners and directors, its charter or partnership agreement, which may affect its registration status.
It is an important amendment, said Noorul Hassan, partner, Lakshmikumaran & Sridharan Attorneys.“A similar change was also brought for registered valuers organizations for a change in the composition of governing boards. The amendment also requires payment of fee to the authority for submitting these intimations," Hassan said.
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