Valuation Regulation – A Game Changer

Valuation is considered as one of the most critical areas in finance as it plays a crucial role such as buy/sell, solvency, and M&As. Besides this, it plays a vital role in the insolvency resolution regime where liquidation value has to be ascertained by the resolution personnel through the registered valuers. The section 247 of the Companies Act, 2013 has been laid exclusively for a registered valuer to set out a proper mechanism for valuation of various assets and liabilities related to the company and standardize the procedure thereof. The central government has notified the said rules with effect from 18th October, 2017.

On 23rd October, 2017, the central government issued a notification for delegating its powers and functions under section 247 of the Companies Act, 2013 to the Insolvency and Bankruptcy Board of India (IBBI) and specified the IBBI as the authority under the Companies (Registered Valuers and Valuation) Rules, 2017. For a person to be registered with IBBI as a registered valuer, he must have necessary qualification and experience to be enrolled as a valuer member with a Registered Valuer Organization (RVO). The personnel has to complete a recognized educational course conducted by RVO and pass the valuation examination conducted by IBBI.

Though the said regulation is specifically pertaining to the valuation under Companies Act 2013, it shall soon get adapted to all the sections of businesses in India. The said regulation can be termed as a game changer in the valuation industry. It has now created standards and processes related to the governance of the valuation practices. Some of the benefits include:

1. Entry Barrier: By prescribing the requisite qualifications and examination process, a clear filtration process has been laid down

2. Professionalism: The said regulation shall create and increase professionalism level in the said area of expertise

3. Responsibility and accountability: The code prescribes duties and responsibilities of the valuer. In case of misconduct, disciplinary action shall be taken and can go the extent of the expulsion of membership 

4. Skill Enhancement: The regulation prescribes regular training on an annual basis for the practicing valuers. This will help the valuers to update their knowledge on a regular basis.

Thus, the newly introduced regulation for registered valuer is a welcome step, which has been taken by the central government. Though, with some initial teething problem of implementation, it will surely bring the much-needed regulation and process of governing the valuation practice, which will have a huge impact on the overall sustaining economic condition of the country in times to come.

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