Home / News / India /  Centre revamps rules on valuers

The ministry of corporate affairs has revamped the rules governing entities performing valuation of corporate assets such as plant, machinery, securities and goodwill, for improving their 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 that professionals should be using. Valuation professionals play a key role in corporate restructure, mergers and acquisitions and bankruptcy resolution as these transactions rely on their assessment of assets and liabilities, a key part of the due diligence. Fair assessment of corporate assets and liabilities is crucial to avoiding litigation. 

The amendments said that no partnership entity or company shall be eligible to be a registered valuer if it is not a member of a registered valuer organisation. Also, the new rule stipulates that these entities should not be registered with more than one registered valuer organisations at one point in time. 

Registered valuers organisations offers educational courses for individuals and offers registration as valuers. It is the bankruptcy rule maker, the Insolvency and Bankruptcy Board of India (IBBI) which recognises such educational courses and is the designated authority under law for governing valuation profession.  

 “Restricting the registration of a valuer to one registered valuer organisation at a given point in time will help in having an effective disciplinary mechanism," said a person informed about the development. A partnership or company registered as a valuer has six months to comply with this rule, as per the amendment.   

The amendments also remove ambiguity in the professional standards by specifying that valuers could follow either internationally accepted valuation standards or valuation standards adopted by any registered valuers organisation. 

 “The amendments in valuation rules have sought to clarify the standards used by the valuers to conduct valuations. Currently, valuers were facing ambiguity in following specific internationally accepted valuation standards and valuation standards adopted by respective registered valuers organisations in the absence of specific direction. The new rules have clarified that the valuers can follow either one of them," explained Amit Maheshwari, Tax Partner at AKM Global, a tax and consulting firm.  

Besides, the amendments also clarified that though a registered valuer is not allowed to take up employment, holding designation of whole-time director shall still be allowed. These clarifications are expected to improve and strengthen the valuation practice in the country, said Maheshwari. 

The amendments also specify that registered valuers have to intimate the authority—IBBI—about any change in their internal structure, changes in the partners and directors, changes in its charter or partnership agreement that may affect its registration.  

This is an important amendment, according to Noorul Hassan, Partner with Lakshmikumaran & Sridharan Attorneys. “A similar change was also brought for registered valuers organisation for change in composition of governing board. The amendment also requires payment of fee to the Authority for submitting these intimations," said Hassan.

 

ABOUT THE AUTHOR

Gireesh Chandra Prasad

Gireesh has over 22 years of experience in business journalism covering diverse aspects of the economy, including finance, taxation, energy, aviation, corporate and bankruptcy laws, accounting and auditing.
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