A Valuation Certificate means a certificate generally issued by the Practicing Chartered Accountant or Registered Valuerwith respect to shares to be issued by the entity.In other words, valuation means to assess the worth of the company assets whether tangible or intangible. Valuation Certificate is the mandatory requirement as per Companies Act, 2013 if shares issued by company through the Private Placement mode and also the mandatory requirement as per RBI laws in case Foreign Direct Investment (FDI) received by the company.
Whenever the Foreign Direct Investment (FDI) is received by the Company, the company need to file form FCGPR in case of issuance of capital instruments from the resident to the non- resident or FCTRS in case of transfer of security, than as per regulation 11 of FEMA 20(R) the valuation certificate stating that the fair value worked out as per any internationally accepted pricing methodology for valuation on an arm's length basis, duly certified by a Chartered Accountant or a SEBI registered Merchant Banker or a practicing Cost Accountant shall be required.
In case of issuance of Capital Instruments by any way whether by right issues, private placement, sweat equity shares, etc, the valuation certificate shall be required by the Registered Valuer who shall be carrying out valuation of assets belonging to a class or classes of assets.
In case of issuance of convertible Capital instruments, the Valuation report shall be obtained at a value worked out by the Registered Valuer at least 30 days prior to the Extra-Ordinary General Meeting in which company has proposed to issue securities for members approval.
As per Income Tax Act until unless shares are issued on premium there is no need of valuation certificate. However, if shares issued on premium then valuation report issued by registered Valuer shall be accepted here.
In case shares are issued or transferred by closely held company not being a startup company to any person then there is a requirement to obtain the valuation report from the Practicing Chartered Accountant.
Chartered Accountant or a SEBI registered Merchant Banker or a practicing Cost Accountant can issue the Valuation Report in accordance to FEMA rules.
Registered Valuer is the person who has passed the requisite exam as per Insolvency and Bankruptcy Board of India.
Valuation Certificate can be used with in 6 months from the date of issue.
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