Valuation plays a important role in financial transactions, investment decisions, and regulatory compliance for companies. The Companies Act, 2013 lays down provisions for valuation, ensuring transparency and fairness in determining a company's worth. This Article covers the latest government rules and norms related to valuation under the Act. Legal Framework for Valuation Under Companies Act, 2013 The Act mandates valuation in specific circumstances, which must be carried out by a Registered Valuer as per Section 247 of the Companies Act, 2013. The Insolvency and Bankruptcy Board of India (IBBI) regulates the valuation profession in India, ensuring compliance with established norms. Instances Where Valuation is Required Issue of Shares (Section 62 & 42) When a company issues new shares (rights issue, preferential allotment, private placement), valuation is needed to determine the fair price. Merger, Amalgamation & Arrangement (Section 230-232) In case of corporate restructuring, valuation helps assess share exchange ratios and asset valuation. Acquisition of Assets or Securities Companies acquiring assets or securities must obtain a valuation report to reflect a fair transaction. Corporate Insolvency Resolution Process (CIRP) Under IBC, valuation is required for asset determination and resolution planning. Related Party Transactions (Section 188) Valuation ensures that transactions with related parties are fair and not prejudicial to minority shareholders. ESOPs & Sweat Equity Shares (Section 62(1)(b)) Fair valuation is needed to determine the price at which Employee Stock Options (ESOPs) are granted. Liquidation (Section 59 of IBC) Liquidation proceedings require valuation to ascertain asset realization values. Role of Registered Valuers The Companies (Registered Valuers and Valuation) Rules, 2017 specify that only a Registered Valuer can conduct valuations under the Act. A valuer must be registered with IBBI and hold the necessary qualifications. Responsibilities of a Registered Valuer: Conduct independent and fair valuation. Adhere to the Valuation Standards prescribed by IBBI. Maintain confidentiality and professional integrity. Latest Government Norms and Updates Mandatory Valuation Standards: The government mandates compliance with ICAI Valuation Standards (2020) and Registered Valuers Organization (RVO) standards. E-filing of Valuation Reports: Companies must submit valuation reports electronically while filing with MCA (Ministry of Corporate Affairs). Valuation in Startups: Special provisions exist for startups under DPIIT (Department for Promotion of Industry and Internal Trade) to determine fair market value (FMV) for tax compliance. Increased Oversight on Related Party Transactions: The government has emphasized stricter valuation norms to prevent misreporting in related party dealings. Cross-Border M&A Transactions: The RBI mandates fair valuation reports for outbound and inbound mergers, ensuring adherence to FEMA guidelines. Challenges in Valuation Regulatory Compliance: Companies must follow multiple valuation guidelines based on the transaction type. Subjectivity in Valuation: Determining intangible asset value and startup valuation remain complex. Frequent Amendments: Continuous updates in regulations require businesses to stay informed. Conclusion Valuation under the Companies Act, 2013 ensures accountability, transparency, and fairness in financial transactions. With evolving norms and government updates, businesses must engage Registered Valuers to stay compliant. Proper valuation not only meets regulatory requirements but also strengthens investor confidence and corporate governance. https://www.compliancecalendar.in/valuation-services