An eight-member panel under IBBI chairman MS Sahoo has suggested that the government bring in a new law to set up a national body for valuation professionals, along the lines of those meant for chartered accountants or company secretaries, to both regulate and develop a special cadre of valuers and an institutional framework for them.

The move comes at a time when stressed companies worth thousands of crores are up for sale under the Insolvency and Bankruptcy Code (IBC) and there is no standardised formula for valuing these assets nor is there a proper regulatory framework governing the valuation profession. Proper valuation of a company is also a crucial part of any merger and acquisition.

FE had first reported about such a plan on December 25.

The report suggests that the eco-system should have four key elements. First, a National Institute of Valuers (NIV) should be set up, which would be a statutory body primarily responsible for the development and the regulation of the valuation profession in India and registration and regulation of valuers, valuer institutes and valuation professional organisations. Second, there would be a dedicated cadre of valuers, who would render valuation services, after registration with the NIV. Third, there is a need for facilitating the establishment of valuer institutes, who would provide educational courses, after registration with the Institute. Fourth, valuation professional organisations (VPOs), who would be front-line regulators primarily responsible for development of the valuation profession, after registration with the NIV.

The proposed cadre of valuers (like chartered accountants, etc) will include both the current practitioners and freshers wishing to have a career in valuation.

Currently, only an ad-hoc framework for valuation professionals is in place, which is basically governed by the Companies Act, and the government has designated the Insolvency and Bankruptcy Board of India (IBBI) as the authority to implement the new regime of registered valuers.

For long, in the absence of a specialised cadre of valuers, valuation services have been usually provided by chartered accountants and merchant bankers, etc. They typically issue valuation certificates for the purpose of compliance under the Companies Act and other laws like SEBI Regulations and even I-T Act. However, the lack of a standardised formula has resulted in too much of subjectivity in the valuation of companies.

In October 2017, the MCA notified the Section 247 of the Companies Act, 2013 and introduced the Companies (Registered Valuers and Valuation) Rules, 2017. But to give the valuation industry time for transition, the MCA had allowed time until January 31, 2019 for existing valuers to register themselves. This means, from January 31 last year, only a registered valuer is allowed to undertake valuation required under the Companies Act. However, once the proposed law and a broad regulatory framework come into being, the valuation profession will get a fresh leg-up, according to analysts.