The Companies Act 2013, a landmark legislation in India, outlines various provisions and regulations governing the functioning of companies. Among these, valuation requirements play a crucial role in different scenarios such as preferential issue of further shares, non-cash transactions, compromise or arrangements, purchase of minority shareholding, and the submission of reports by Company Liquidators. In this article, we will delve into the key aspects of valuation under the specified sections of the Companies Act 2013.
Section 62(1)(c) – Preferential Issue of Further Shares: This section pertains to the issuance of further shares on a preferential basis by a company. Valuation becomes paramount in determining the issue price of such shares, ensuring fairness to existing shareholders and compliance with regulatory norms.
Section 192(2) – Non Cash Transactions Involving Valuation assumes significance in non-cash transactions involving companies, such as acquisitions, mergers, or any exchange of securities. Section 192(2) mandates the determination of the value of assets involved, and a qualified valuer’s expertise is enlisted to assess the fair value of these non-cash transactions, ensuring transparency and accountability.
Section 230(1), 230(3), 232(3)(h) – Compromise or Arrangements: Valuation is integral to compromises or arrangements between a company and its creditors or shareholders. Section 230(1) emphasizes the need for a valuation report when proposing such arrangements. Sections 230(3) and 232(3)(h) further delineate the instances where valuation reports are essential, ensuring that the interests of stakeholders are protected and the process is conducted fairly.
Section 236 – Purchase of Minority Shareholding: When a company decides to purchase the minority shareholding, Section 236 necessitates a valuation report. This is vital in establishing a fair price for the minority shares, preventing any undervaluation or overvaluation that could impact the rights and interests of minority shareholders.
Section 281 – Submission of Report by Company Liquidator: In the event of company liquidation, Section 281 requires the submission of a report by the Company Liquidator. Valuation plays a pivotal role in determining the value of assets and liabilities, facilitating an accurate representation of the company’s financial position at the time of liquidation.
