The Institute of Chartered Accountants of India (ICAI) has provided VCM answers to the questions (ATQs) on “Valuation Date, Valuation Report Date and Events Occurring between these dates”.
A live webcast is been initiated by the Valuation Standards Board of ICAI (VSB) upon the subject “Valuation date, Valuation report date, and events between these dates!” dated 27 June 2021.
The Webcast held a good response and was attended by more than 2000 viewers. The repeated webcast can be seen again at https://live.icai.org.
There arise various questions while the running of the webcast. ICAI answers to the asked question (ATQs) which were raised while the webcast undergoes which does not need the application of the valuation or rules. Indeed the repetitive questions and the questions irrelevant to the topic have not been answered.
ICAI during answering the ATQs states that if the valuation date given through the customer or chosen through the valuer is similar to the final valuation date. It is somewhere possible that there shall be no requirement to manage the details arriving after the valuation date. Otherwise, the valuer might require to adjust the value or take make the guidelines upon the grounds of himself.
To determine the effective date of valuation we can divide valuation assignments into 2 sections named pre-transaction valuation in which a transaction furnished before the valuation reports example preferential allotment, mergers and acquisitions, issue of sweat equity shares, etc. and Post-Transaction valuation: wherein valuation is done after a transaction has already materialized, e.g., for accounting, taxation or litigations.
A pre-translation valuation occurs beneath the Companies Act, 2013, FEMA, IBC 2016 & SEBI. While under Income Tax, Ind AS & litigations, post-transaction valuation is done. Valuation consultancy is usually pre-transaction while valuation review is usually post-transaction.
Moreover beneath the companies act 2013 the valuation might be classified as the pre-transaction valuation, i.e., the transaction is entered into based on value certified by the valuer, and post-transaction valuation i.e., the transaction is completed much later than the valuation date.
ICAI states that an individual shall not have the date of valuation post to the date of the reported signing.
Beneath IBC the challenge shall be the same that is the gap among the events. Beneath IBC a valuer is needed to provide the valuation as on the corporate Insolvency Resolution (CIRP)
but resolution plans usually are accepted on a much later date than the CIRP date.
Moreover, the law shall not be specified any duration for which the valuation report shall remain valid. It lefts with an entitlement of the resolution Expert or Committee of Creditors to decide that till what time the valuation report shall leave relevant and when they required to furnish the amended valuation
According to the companies act 2013, the valuation is not important for the right issue. According to the income tax act if the shares are given on premium then only the valuation is important else it may be considered as the companies income.