Valuation of Shares and other Securities under Companies Act, 2013

As per Companies Act, valuation may be required to be made in respect of any property, stocks, shares, debentures, securities or goodwill or any other assets (herein referred to as the assets) or net worth of a company or their liabilities. 
Under this article, we will consider valuation aspects of shares and other securities under companies act 2013.

Who can conduct valuation of shares?
after 31st January, 2019 only a person registered as Registered Valuer as per Section 247 are eligible to do valuation of Securities. Except Registered valuer no other persons like (Merchant Banker or Chartered Accountant) can do the valuation of Securities. 

What is the validity of a valuation report given under Sec 247 of the Companies Act?
It is valid upto 6 months usually. However, it depends upon events for which you are considering the Valuation report.

Is valuation report required for rights issue?
Not mandatory in case of rights issue.

If rights issue is at the premium, then?
Still not mandatory, but advisable to obtain in case to prove the basis of premium to income tax department.

Is valuation report required for issue of debentures?
Yes, for debentures also.

Can a CA do share valuation?
The income tax department has barred all chartered accountants (CAs) from valuing shares of closely-held companies. ... So, unlisted shares or unlisted companies may be sold or valued by a CA's valuation but, for I-T purposes, it will require a merchant banker's valuation report.

Is valuation required for transfer of shares?
Not mandatory.

In case of transfer of shares are at premium?
Still not mandatory, but advisable to obtain in case to prove the basis of premium to income tax department. 

Is valuation required for buyback of shares?
Not mandatory.

What is need for valuation of shares?

What are the method of valuation of shares?
five methods of valuation of shares, i.e., (1) Asset Backing Method, (2) Yield-Basis Method, (3) Fair Value Method, (4) Return on Capital Employed Method, and (5) Price-Earning Ratio Method

valuation of unquoted shares?

What is Rule 11ua?

How do you value a share in a private company?
Will tell in detail by checking any valuation report.

What are the area where valuation is used?


What is the validity of a valuation certificate used to issue shares for private allotment of shares under sec 62 of companies act/ fema (in case of receipt of funds from foreign investor)?

Valuation certificate is required under FEMA to issue shares to non-residents,However, no where under both act time period for validation of Valuation report is mentioned. But generally when we attach a valuation report of an older period. Rbi issues a notice that please attach valuation report not older than 6 months.

What are internationally accepted pricing methodology for valuation of shares?

RBI acknowledges internationally accepted pricing methodology for valuation of shares. In April 2010, the Reserve Bank of India (RBI) had mandated that the valuation of shares issued by an Indian company to a foreign company should be done based on the Discounted Cash Flow (DCF) method only

Is valuation report mandatory for private placement?
It is mandatory to obtain report of Registered Valuer for allotment of shares as Private Placement, irrespective of fact that the issue is at par or at premium. 

Shares are being issued for consideration other than cash, is valuation required?

When the shares or securities are to be allotted for a consideration other than cash, the valuation of such consideration shall be performed by a registered valuer who shall submit a valuation report to the company giving justification for such valuation.

Does it depends upon the type of shares i.e. equity or preference etc  no it depends upon mode

In case of incorporation of LLP: One of the Partner wants to contribute asset as his form of contribution then do we need valuation report to be attached or amy other documents?


Yes valuation report in this case.


whether a fresh valuation report is required to obtain for subsequent private placement in a financial year, if it already obtained the valuation report on the first time private placement ?

As the act is unclear on the point, we can proceed with the following cases:

1. If date of valuation report is not older than 6 months then can take that report. (Also note same price has to be taken)

2. If older than 6 months, then advisable to obtain a fresh report.

Also Note this is a common practice, but not written anywhere as such.

The need for valuation of shares or securities arises when there is an issue or transfer of those shares, and ofcourse Unlisted shares because listed shares already being traded at market price.

The provisions related to valuation of Shares or securities can be found under the Companies Act, income tax act and fema.

Updated with latest informations and amendments.

For any sort of valuation report kindly connect CS RV Raunak Gupta at 9910226715
This blog is authored by Company Secretary Ronak Gupta. He is author of many blogs and runs many websites and youtube channels. His work is dedicated to corporate laws, legal, secretarial, professional services and also in strategy formulations for corporates. Mail him at: csronakgupta23@gmail.com or call at :9910226715

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