Section 247 of the Companies Act, 2013 (“the Act”) mandates that where a valuation is required to be made in respect of any property, stocks, shares, debentures, securities, goodwill, or any other assets or net worth of a company or its liabilities, it shall be valued by a person registered as a valuer with a recognised valuer organisation and appointed by the audit committee or, in its absence, by the board. The provision is the statutory foundation of the registered valuer regime, and it has acquired renewed significance in the context of capital reduction and buy-back transactions.
The Statutory Framework and the 2026 Amendment
Section 247(1) requires the valuation to be conducted by a registered valuer who possesses the prescribed qualifications and experience and who is a member of a recognised valuer organisation. The Companies (Registered Valuers and Valuation) Rules, 2017 prescribe the eligibility, the registration process, and the conduct of business rules. The valuer must be independent of the company, and the valuer's report must comply with the valuation standards.
The Corporate Laws (Amendment) Bill, 2026 proposes a significant institutional change. New Section 247(1A) designates the Insolvency and Bankruptcy Board of India (“IBBI”) as the Valuation Authority for the purposes of Section 247. The IBBI would grant and renew recognition to valuer organisations, grant and renew registration to valuers, make recommendations on valuation standards, monitor and enforce compliance, and oversee the quality of recognised organisations and registered valuers. The penalty regime would also be strengthened: recognised organisation violations could lead to certificate cancellation for six months to ten years and a penalty of up to ₹1 crore, registered valuer violations could lead to certificate cancellation and a penalty of up to ₹10 lakh, and fraudulent valuation under new Section 247(3C) could attract imprisonment of up to one year and a fine of ₹50,000 to ₹25 lakh or eight times the remuneration, whichever is less.
The Role in Capital Reduction
A capital reduction under Section 66 requires the company to establish that the reduction is fair and that the creditors' interests are protected. The registered valuer's report is the evidentiary foundation for the fairness of the reduction. The report must address the net worth of the company, the value of the assets and liabilities, and the proposed reduction's effect on the shareholders and creditors.
The NCLT has the power to scrutinise the valuation and to reject a reduction that is not supported by a proper report. A valuer who certifies a reduction without examining the company's financial position or without applying a recognised methodology exposes the report to challenge and the valuer to penalty.
The Role in Buy-Back
A buy-back under Section 68 does not require a valuation report in every case, but where the buy-back is through a tender offer or where the price is not determined by the market, the board may obtain a valuation report to establish the fairness of the price. The registered valuer's report is also relevant where the buy-back is funded from the securities premium or free reserves and the company must demonstrate that the buy-back will not impair its capital.
The Appointment and Independence
The appointment of the valuer must be made by the audit committee or, in its absence, by the board. The valuer must not be an employee or a related party of the company, and the valuer must disclose any conflict of interest. The valuer's independence is a condition of the report's reliability, and the NCLT will scrutinise the appointment where the report is challenged.
Call to Action
Anuj Desai & Associates advises companies, audit committees, and registered valuers on the Section 247 valuation regime—from the eligibility and appointment of the valuer and the scope of the report to the defence of the valuation before the NCLT and the compliance with the 2026 amendment. If your company requires a valuation for a capital reduction or a buy-back, we can help you structure a process that meets the statutory requirements.
📧 office@anujdesaiassociates.com
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