New Delhi: The government will soon form an expert panel to work out details of a proposed legislation to regulate the business of corporate valuations, that will complement the Companies Bill, 2008, which was tabled in Parliament last Thursday.
“We are forming an expert committee to look into detailed provisions of what the Bill (Valuation Professionals Bill) should contain,” said a senior official at the ministry of corporate affairs. “It will complement the Companies Bill, 2008, which has laid down the provisions and the need for appointing professional valuers,” the official added, asking that he not be named.
The Union government intends to introduce the Valuation Professionals Bill in the next session of Parliament. The Companies Bill provides for a framework to enable fair valuations in companies and, thus, charts a need for professional valuers. Currently, corporate valuation is done by auditors, merchant bankers, company secretaries or chartered accountants. Such valuation is required for initial public offerings, sealing mergers and amalgamations, and for strategic alliances and corporate restructuring.
According to the Companies Bill, independent valuers— chartered accountants, cost and works accountants and company secretaries—need to register themselves with the federal government.
“Since the Companies Bill has laid down that the appointment of valuers will be made by an audit committee or, in its absence, by a board of directors, a valuer cannot be just a chief executive’s man and, therefore, will be impartial in valuing the company’d assets or networth and will protect the interest of shareholders, including the minority shareholders,” said Preeti Malhotra, former president, Institute of Company Secretaries of India (ICSI).
The ministry official quoted earlier said a concept paper issued last year by the ministry seeking inputs from members of the three professional bodies—ICSI, the Institute of Chartered Accountants of India (Icai)) and the Institute of Costs and Works Accountants of India—did not generate enough ideas on what the Valuation Professionals Bill should contain. “Therefore, the need for forming an expert committee was felt,” he said.
Although members of the panel are yet to be finalized, the official said they would be a mix of professionals, ministry officials and experts in company law.
The proposed legislation also seeks to create a council of valuation professionals of India, comprising experts from the three professional institutions, that will oversee all valuation professionals. The council will set standards for valuation professionals, train them, issue qualifying norms for individuals and monitor the professionals.
“This will introduce considerable professionalism in the business of valuation as only those qualifying the norms set by the government will be able to practise. Besides, they will be constantly monitored by the government,” said Malhotra.
The ministry’s concept paper had also suggested that those violating council guidelines be penalized. This included penalties if a valuer disclosed confidential information or was negligent while issuing public statements or while carrying out due diligence.
Icai had earlier resisted the Bill. “All professionals dealing with valuation are already well-versed in the subject. I don’t understand what is the need for a monitoring body and training for valuers,” Sunil Talati, former president, Icai, had earlier told Mint, which reported on the details of the proposed law on 15 May 2007.
Icai now says it will take a call only when the final provisions are spelt out. “We will comment only once we have a final look at the draft Bill,” said Icai president Ved Jain.
Also Read our 15 May 2007 story “Chartered accountants oppose regulation move”