Notes on Valuation and Company Law

CBDT's Income-tax Rules, 2026 build a complete valuer registration regime under Section 514 of the Income-tax Act, 2025: Form 169, a ₹10,000 fee, a qualification table, a statutory percentage-of-value fee scale, and its own report format. It carries the Wealth-tax Act's ten asset categories over intact and grandfathers those registrations to 30 September 2026. A Section 247 registered valuer gets no recognition, no exemption, and no mention anywhere in it.

'Registered valuer' names two unrelated credentials sixty years apart: the Section 247 Companies Act one and a Section 34AB Wealth-tax Act one that Rule 11U(g) still cross-refers to, not just for virtual digital assets but for the jewellery-and-art component buried inside the ordinary unquoted-share NAV formula. A Section 247 valuer has no Annexure IV asset class that even covers that work. FEMA, the SAST Regulations, and Rule 11UA's own DCF branch skip 'valuer' entirely and name a Chartered Accountant, merchant banker, or Cost Accountant instead.

Section 188 and SEBI's Regulation 23 both gate related-party transactions on Board and shareholder approval, not valuation. Neither the Companies Act, Rule 15, Ind AS 24, nor Section 92BA (narrowed to tax-holiday transactions since 2017) mandates one. SEBI's own RPT disclosure standards give the pattern away: a valuation report must be disclosed "if any" exists, never a requirement to obtain one.

Rule 11U(b) defines "registered valuer," for Rule 11UA's virtual digital asset mechanism, by cross-reference to Section 34AB of the Wealth-tax Act, 1957, not the Companies Act credential this practice holds. Neither the Companies Act framework nor ICAI's Valuation Standards mention VDAs at all, and RBI and SEBI have yet to settle the underlying regulatory question either.

IVS 500, the standard a registered valuer actually defaults to under Rule 18, applies to "all valuations of financial instruments" with no issuer or holder qualifier at all, and IVS 200 requires valuing non-operating assets separately, both corroborated by ICAI's parallel standards. The genuine gap is derivatives: IVS 500 names no instrument type at all, interest rate swaps included, and SCRA's own securities definition stops at exchange-traded and notified derivatives.

A 2019 MCA committee, chaired by IBBI's own then-Chairperson, recommended moving valuer regulation out of IBBI into a dedicated National Institute of Valuers. That bill was never enacted. The Corporate Laws (Amendment) Bill, 2026 now does the opposite, naming IBBI directly as Section 247's "Valuation Authority" with new registration, standard-setting, and penalty powers, with no public explanation for the reversal.

A 4 February 2026 notification opens DPIIT recognition to cooperative and multi-state cooperative societies for the first time, doubles the turnover ceiling to ₹200 crore, and carves out a Deep Tech category with a 20-year incorporation window and a ₹300 crore ceiling. Section 80-IAC is untouched; wider DPIIT eligibility only widens who gets the sweat equity ceiling carve-out, not the profit-deduction or ESOP TDS deferral privileges.

Every CIRP valuation produces two figures, not one, and Regulation 35 defines and computes them differently at every step. Fair value gets a coordinating valuer and a synergy adjustment on top of the sum of its parts. Liquidation value stays a disaggregated, asset-by-asset number, deliberately.

Order IBBI/Valuation/RVO/05/2026 suspends an RVO's recognition for two years for admitting a CFA (USA) charter holder as a 'provisional' member for Securities or Financial Assets, running him through the 50-hour course and the examination, and recommending him to IBBI. CFA appears nowhere in Annexure IV, the equivalence route reaches university degrees rather than professional charters, and Rule 14(c) is held to be binary: there is no intermediary category of conditional admission.

A December 2025 amendment to the SEBI SBEB Regulations replaces the merchant banker with an independent registered valuer for listed-company ESOP and sweat equity pricing, aligning the Regulations' own "valuer" definition with Section 247. Merchant bankers get a nine-month window to finish work already in progress. The income-tax trigger and unlisted companies are untouched.

Rule 13 exempts listed companies from Section 62(1)(c)'s registered-valuer requirement for preferential issues, substituting SEBI's VWAP formula, but only while the shares trade frequently. The moment they thin out, a control threshold is crossed, or delisting is on the table, ICDR Regulations 165/166A, the SAST Regulations, and the September 2024 Delisting Regulations amendment all reach back for a registered valuer, an independent valuer, or a merchant banker, each under slightly different terms. Rule 11UA runs the identical fork for tax purposes, off its own 'quoted share' definition.

IBBI's own IBC Guidelines name it directly: every discount and premium considered must be described, with a rationale for each. Companies Act valuations carry the same underlying duty with no equivalent checklist, and whether the question even arises depends on whether control is actually changing hands.

The IBBI license does not point to one standard. It points to a stack: Rule 18, ICAI Valuation Standards, and the RVO framework each govern a different slice of the same license, with company law and IBC valuations currently running on the same unamended fallback.

No, and it is worth being precise about why. ICAI Valuation Standard 103 recognises three approaches. Rule 11UA names its own closed list of methods. Neither includes the popular VC heuristics, and case law protection is anchored to methods actually on those lists.

Section 232(2)(d) requires the expert valuation report "if any." Rule 6 only says who is qualified to prepare one, not whether one is required. SEBI closes that gap for listed companies, and the three-method convention everyone follows traces back to a 1996 Supreme Court ruling, not a modern rule.

Two different certifications, constantly treated as one. DPIIT recognition is the base status; Section 80-IAC is a further, narrower approval, and which valuation-adjacent privileges a startup gets depends on which one it actually holds.

A SAFE fits no category the Companies Act recognises: not equity, since no shares are allotted at signing, and not debt, since it deliberately carries no interest or maturity. FEMA's closed list of equity instruments excludes it too, and even the one instrument built for startups, the Convertible Note, is structurally close to the opposite of a SAFE.

Sweat equity gets confused with ESOP constantly, but company law treats them as opposites. Where ESOP asks for almost nothing, sweat equity requires a registered valuer twice over, and income tax asks a third, different question again.

Regulation 8(16) let SEBI discard an acquirer’s own merchant banker’s open-offer price. It has been invoked against the same company twice: a 2019 order upheld to the Supreme Court, and a 2023 order SAT quashed in December 2024 for misapplying the provision, now on SEBI’s own appeal.

Berkus, Scorecard, and Risk Factor Summation get treated as "how valuers value startups." They are actually negotiation heuristics for an initial deal price. What a fund reports as fair value afterward runs on a completely different, formally named set of methods.

'DCF approach' and 'market method' get used interchangeably in ordinary conversation. ICAI Valuation Standard 103 keeps the two words genuinely distinct: an approach is a category, a method is the named technique inside it, and a discount or premium is a third, separate adjustment on top of both.

What the Companies Act actually requires when a company issues Compulsorily Convertible Preference Shares, and the two very different ways the conversion price can be set.

Rule 21 of the FEMA (Non-Debt Instruments) Rules names a Chartered Accountant, a SEBI-registered Merchant Banker, or a practising Cost Accountant as the only professionals who can certify a cross-border pricing valuation. "Registered valuer" appears nowhere in it, and Section 247 explains exactly why.

“ESOP valuation” is not one thing. Company law, accounting, income tax, and SEBI each ask a different question, and the answer to who is allowed to do it changes every time.

FEMA still runs on the old model: a Chartered Accountant or merchant banker doing valuation as a side skill. Company law worked the same way until 2017. The 2005 Irani Committee report that proposed changing it is on the record in surprising detail, and IBBI becoming the regulator wasn't its recommendation, chronologically it couldn't have been, but its own operational need for valuers in 2017.

Section 56(2)(viib) is gone, fully repealed for every company from AY 2025-26. The exposure it created did not go with it, but the machinery that guarded it did. Two other provisions still touch startups constantly, and the test they run is simpler than most people assume.

Unlike a SAFE, a DVR share is named directly in Section 43 as a form of equity share capital, so it is squarely a registered valuer's job. Checked against the full ICAI Valuation Standards text, none of them name a specific method for the voting differential itself, an academically well-studied concept that has simply never been written into either ICAI's or IVS's own list of approaches.

Nothing in Section 247, the Valuation Rules, or ICAI VS 303 draws a line between equity and preference shares; the asset class is Securities or Financial Assets, and ICAI names "compound instruments" as a financial instrument example directly. Where the boundary actually shows up is transactional: pricing a fresh issue needs a valuer, redemption at terms fixed years earlier does not.

Unlike preferential allotments, ESOP-adjacent sweat equity, or SEBI schemes, a share buy-back has no registered-valuer requirement on either side of the listed and unlisted divide. The reason why says a lot about what the valuer requirement is actually protecting.

"Securities" is imported wholesale from Section 2(h) of the SCRA, 1956, via a straight cross-reference in Section 2(81) of the Companies Act. "Financial assets" is never defined anywhere in that framework, and neither SARFAESI's definition nor the General Clauses Act fills the gap; the closest real analogue is an accounting concept from Ind AS 32.

Rule 11UA's PV/PE formula and the dividend-yield method both prorate a partly-paid share's value by what has actually been paid. Classic net-asset practice instead subtracts the flat unpaid rupee amount within a single class of shares, only turning proportional once a second share class enters the picture. ICAI's Valuation Standards and IVS never take a position either way, and Section 68(2)(e) sidesteps the question entirely by barring partly-paid shares from a buy-back altogether.

Section 68(2)(e) bars a buy-back unless every share involved is fully paid-up, unlike its six neighbouring conditions, which all protect an identifiable interest in plain terms. Neither the Section, the Rules, nor the available commentary states why. The best available reading is structural, not attested: a buy-back already avoids needing a valuer, and partly-paid shares are the one instrument this practice's own research found the least settled pricing convention for.

Valuing the shares of a company holding nothing but land and building is a Securities or Financial Assets engagement, since shares are securities regardless of what backs them. Rule 7(c) bars that SFA valuer from certifying the land figure under their own registration, and Rule 8(2) supplies the fix: a disclosed input from a Land and Building valuer, with the SFA valuer alone signing the share valuation and carrying full liability for it.

If one person genuinely holds both a Securities or Financial Assets and a Land and Building registration, Rule 7(c) has nothing left to restrict, and Rule 8(2)'s disclosed-input mechanism, built around 'another registered valuer,' never triggers. Rule 7(h) solves the equivalent problem explicitly for a firm with two differently-qualified partners, requiring the specifically-qualified one to sign each class's portion. No equivalent provision exists for one individual holding both personally, and IBBI's own data shows barely 75 of 4,892 registered individuals hold any two-class combination at all.