Companies act
Under the Companies Act, 2013 in India, valuation is carried out for various purposes as stipulated in different sections of the Act. Here is a list of common purposes for which valuation is conducted under the Companies Act, 2013, along with the relevant sections:
- Valuation for Share Capital and Securities –
Section 59: Valuation is conducted for the issuance and allotment of shares and debentures at a value other than the face value.
- Valuation for Mergers and Acquisitions –
Section 230(2): Valuation is required for mergers, amalgamations, or demergers to determine the fair value of shares and the exchange ratio for the parties involved.
- Valuation for Reduction of Share Capital –
Section 66: Valuation is carried out for the reduction of share capital when a company seeks to reduce its share capital for various reasons.
- Valuation for Winding-Up and Liquidation –
Section 270: Valuation of company assets is necessary during the winding-up of a company to ascertain the value of assets available for distribution to creditors and shareholders.
- Valuation for Buyback of Shares –
Section 68: Valuation is required for the buyback of shares by companies, especially to determine the buyback price.
- Valuation for Sale of Assets –
Section 180(1)(a): Valuation may be needed for the sale, lease, or disposal of a company’s undertaking, subject to the approval of shareholders.
- Valuation for Employee Stock Option Plans (ESOPs) –
Section 62(1)(b): Valuation is conducted to determine the pricing of shares or securities offered to employees under ESOPs.
- Valuation for Right Issues –
Section 62(1)(a): Valuation is conducted for determining the price at which shares or securities are offered to existing shareholders in a rights issue.
- Valuation for Preferential Allotment –
Section 62(1)(c): Valuation is necessary for determining the price at which shares or securities are offered on a preferential basis.
- Valuation for Minority Interest and Shareholder Disputes –
Section 236(1): Valuation may be conducted in the case of disputes between shareholders or in other circumstances as provided in the Act.
- Valuation for Valuation of Assets and Liabilities –
Section 247: This section of the Companies Act, 2013, pertains to the valuation of assets and liabilities, including tangible and intangible assets, for various purposes such as financial reporting, mergers and acquisitions, and related-party transactions.
These are some common purposes for which valuation is conducted under the Companies Act, 2013, along with the relevant sections of the Act. Valuation is a critical aspect of corporate transactions, ensuring transparency and fairness in various dealings involving a company’s assets and securities.
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