Nov 14, 2018

Analysis of Companies (Registered Valuers and Valuation) Fourth Amendment Rules, 2018

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Vide its notification dated 13th November, 2018, the Ministry of Corporate Affairs (MCA) has amended the Companies (Registered Valuers and Valuation) Rules, 2017.

The synopsis of these amendments with our comments are given below –

1. Under Rule 1 sub rule 3 is inserted which states that –

These rules shall apply for valuation in respect of any property, stocks, shares, debentures, securities or goodwill or any other assets or net worth of a companv or its liabilities under the provision of the Act or these rules.

Explanation.- It is hereby clarified that conduct of valuation under any other law other than the Act or these rules by any person shall not be affected by virtue of coming into effect of these rules.”.

In rule 10, the words “and he may conduct valuation as per these rules if required under any other law or by any other regulatory authority” shall be omitted.

In rule 11, the Explanation shall be omitted.

CP Comments –

The insertion of above sub rule is clarificatory in nature in line with the Section 247 of the Companies Act, 2013

The explanation is provided to clarify doubts that as of now these Rules only govern the Valuation requirements under the Companies Act, 2013 and Insolvency and Bankruptcy Code, 2016. This means that the conduct of valuations under other laws including Income Tax, FEMA, SEBI etc.) shall not be affected by virtue of these Rules. Both the omissions in Rule 10 and 11 are dealing with this matter itself.

However we are of the view that going forward it would be prudent under all laws and for professionals engaged in practice of valuation to converge and undertake valuations in accordance with the settled principles of valuations, common education and continuous training for standardised valuation reports. The same now look possible only after the Valuation Standards are framed in accordance with Rule 18 of these Rules. The Committee to advise on valuation matters in accordance with Rule 19 of these Rules has representation from the CBDT, RBI, SEBI, IRDA etc. which is a right step in this direction. Once it is done, it would also result in ease of business.

2. Under Rule 3 sub rule 2 in clause (a), the word “not” shall be omitted

CP Comments –

The Rule 3(2) deals with the Registration of Firm or Company as a Registered Valuer.

The Rules do not permit registration of company as a Valuer where 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 a subsidiary, joint venture or associate of another company or body corporate however from the language a different interpretation was also emerging. The omission of word “not” now settles the position and is more clarificatory in nature.

3. Under Rule 4,-

in clause (c), the words, brackets and letters “and having qualification mentioned at clause (a) or (b)” shall be omitted

CP Comments-

The Rule 4 deals with the Qualifications and Experience of Registered Valuer

Rule 4 (c ) deals with the case of Professionals wherein besides being a Professional (CA/CS/CWA), there was requirement to be a graduate. This was causing undue hardship to the Professionals as a few of the Professionals were not having graduation degrees due to which their Registrations as a Valuer was pending.

Further Explanation III has been added to Rule 4 which states that – For the purposes of this rule and Annexure IV, equivalent’ shall mean professional and technical qualifications which are recognised by the Ministry of Human Resources and Development as equivalent to professional and technical degree.”

4. For Annexure IV, the following Annexure The Eligibility Qualification and Experience for Registration as Valuer in terms of Explanation II to rule 4 stands modified

CP Comments-

A big change in this is addition of many streams of engineers(mainly Electronic and Communication, Electronic and Instrumentation, Production, Chemical, Textiles, Leather, Metallurry, or Aeronautical Engineering in Plant and Machinery Category. This would provide much needed relief to thousands of such engineers many of whom are already practicing in the field of valuations to be registered as a Valuer with the Authority.

Download the copy of the MCA Notification here

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