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CRVV Rules 2017 : Detailed analysis

 

Notification & Force date 18 th October, 2017

 Powers derived from Section 247|458|459|469 of CA-2013 

 Section force date Section 247 notified on 18th October, 2017

 Application Valuation of any property, stocks, shares, debentures, securities or goodwill or any other assets or net worth of a company or its liabilities.

[This is under companies act and any valuation under other law not effected]

 Authority As specified by CG u/s 458 of CA-2013- CG specified IBBI effective from 23rd October 2017.  Asset Class

 Distinct group, similar characteristics, can be classified and requires separate set of valuers for valuation.

 Partnership Entity (PE)

 Registered PF or LLP

 Valuation Standards

 As referred in Rule 18-CG by Recommendation of Committee.

 Meaning of words if not defined in rules

 CA-2013 or Specification of Definitions Details Rules, 2013

 Annexures

Annexure I- Model Code of Conduct for RVs

 Annexure II- Forms

Annexure III- Governance Structure & Model Bye Laws for RVOs

Annexure-IV Governance Structure and Model Bye Laws for RV

Eligibility, Qualifications, Experience & Conditions-

 RVs Rule 3, 4 & 7

 RVOs Rule 12 & 14

  Individual PE/Company RVO
ELIGIBILITY

 RVO member

 Recommended by RVO

 Passed exam within 3 years preceding application date

 Qualifications & Experience

 PG Degree/diploma in asset class discipline with 3 YEARS experience

 Bachelor in asset class discipline with 5 YEARS experience

 Member of professional institutes with 3 YEARS experience

 Annexure-IV

 Not Minor

 Not unsound mind

 not an undischarged bankrupt/no applied for bankruptcy

 Resident in India  Not been imprisoned for offence of exceeding 6 months or moral offence involving moral turpitude5 years not lapsed

 Not convicted to offence imprisoned for 7 years or more  not been levied a penalty under section 271J of Income-tax Act, and if levied, 5 years have not elapsed.

 Fit and proper person

 integrity, reputation & character,

 absence of convictions & restraint orders, and

 competence and financial solvency

 Set up with objects of for rendering professional or financial services, including valuation services  Not a subsidiary, JV or associate of another company or body corporate  Not under insolvency resolution  Not undischarged bankrupt  All partners/director eligible as individual eligibility  3 or all partners or directors, whichever is lower, are RVS  Not eligible if none of its partners or directors, is a RV for asset class, for the valuation of which it seeks to be a RV

Registered u/s 25 of CA-1956 or u/s 8 CA2013 with sole object of dealing with matters relating to regulation of valuers of an asset class or asset classes and has in its bye laws requirements specified in AnnexureIII$$  Professional Institute under act of parliament  Following if they convert into or register itself as a company u/s 8 & include in its bye laws the requirements specified in AnnexureIII, within 1 year from date of commencement of these rules: – a) Registered society under the Societies Registration Act, 1860 or any relevant state law, or (b) Trust governed by Indian Trust Act, 1882. Individual PE/Company RVO 

 Conducts educational courses as per syllabus of IBBI .  Grants membership or COP to individuals.  Conducts training before giving COP.  lays down & enforces a code of conduct .  Provides for continuing education of members  monitors and reviews the functioning of members  Has a mechanism to address grievances & conduct disciplinary proceedings against members

       
       
       

 Governance Structure  and Model Bye Laws for RVO

Government Structure:

 Registered under Section 8 of the Companies Act, 2013 with share capital

 sole object is to carry on the functions of a RVO

 not under the control of person(s) resident outside India

 not more than 49% of its share capital is held by persons resident outside India

 Not a subsidiary of a body corporate through more than one layer:

 Itself, promoters, directors & persons holding >10%. of its share capital are fit & proper persons.

Have bye laws

 submit to IBBI its bye-laws along with application for its registration as a RVO

 bye-laws shall provide for all matters specified in the model bye-laws

 bye-laws shall at all times be consistent with the model bye-laws

 RVO shall publish its bye-laws, the composition of all committees formed, and all policies created under the bye-laws on its website.

Amendment of bye laws

 Governing Board may amend the bye-laws by a resolution passed by votes in favour being not less than 3 times the number of the votes, if any, cast against the resolution, by the directors.

 Resolution be filed with IBBI within 7 days from the date of its passing, for its approval.

 The amendments to the bye-laws shall come into effect on 7th day of the receipt of the approval, unless otherwise specified by IBBI.

 RVO shall file a printed copy of the amended bye-laws with IBBI within 15 days from the date when such amendment is made effective.

Composition of governing board

 The Governing Board have a minimum of ____ [Insert number] directors.

More than half of the directors be persons resident in India at the time of their appointment, and at all times during their tenure as directors.

Not more than one fourth of the directors shall be RVs.

More than half of the directors shall be independent directors at the time of their appointment, and at all times during their tenure as directors:

 No meeting of the Governing Board be held without presence of at least one independent director.

 An independent director shall be an individual –

 who has expertise in the field of finance, law, management or valuation;

 who is not a RV;

 who is not a shareholder of RVO; and

 who fulfils requirements under sub-section (6) of section 149 of the Companies Act, 2013.

 The directors shall elect an independent director as the Chairperson of the Governing Board. Explanation – For the purposes of bye laws, any fraction contained in

(a) more than half’ shall be rounded off to the next higher number; and

(b) not more than one- fourth’ shall be rounded down to the next lower number.

MODEL BYE-LAWS OF RVO

COMMITTEES OF THE ORGANISATION

 Advisory Committee of Members

 one or more Membership Committee(s)

 Monitoring Committee

 one or more Grievance Redressal Committee(s), with not less than 3 members;

 one or more Disciplinary Committee(s) consisting of at least 1 member nominated by IBBI

 The Chairperson of each of Committees shall be an independent director of RVO

MEMBERAHIP

 No individual shall be enrolled as a member if he is not eligible to be registered as a RV of IBBI

 Governing Board may provide additional eligibility requirements for enrolment:

 Such additional requirements shall not discriminate on the grounds of religion, race, caste, gender, place of birth or professional affiliation.

PROCESS OF ENROLMENT AS MEMBER.

  By an application in specified form and fees

 RVO examine application in accordance with the applicable provisions of the rules, regulations and guidelines thereunder.

 On examination, RVO give an opportunity to remove the deficiencies

 RVO may require additional documents, information or clarification, within reasonable time.

 RVO may reject an application if the applicant does not satisfy the criteria for enrolment or does not remove the deficiencies or submit additional documents or information to its satisfaction, for reasons recorded in writing.

 The rejection of the application be communicated to the applicant stating the reasons for such rejection, within 30 days of the receipt of the application, excluding the time given for removing the deficiencies or presenting additional documents or clarification by the Organisation, as the case may be.

 The acceptance of the application shall be communicated to the applicant, along with a certificate of membership.

 An applicant aggrieved of a decision rejecting his application may appeal to the Membership Committee of RVO within 30 days from the receipt of such decision.

 The Membership Committee shall pass an order disposing of the appeal in the manner it deems expedient, within 30 days of the receipt of the appeal.

MEMBERSHIP FEES

 RVO may require the members to pay a fixed sum of money as its annual membership fee.

DUTIES OF MEMBERS

 Act in good faith in discharge of his duties as RV

discharge his functions with utmost integrity and objectivity, highest standards of professional competence and professional ethics.

 be independent and impartial, continuously upgrade his professional expertise

 Comply with applicable laws in the performance of his functions; and maintain confidentiality.

RVO to have a Code of Conduct that shall be consistent with, and that shall provide for all matters in the Code of Conduct as specified in the Annexure-I.

MONITORING OF MEMBERS

 RVO to have a Monitoring Policy to monitor the professional activities and conduct of members for their adherence to the provisions of the Act, rules, regulations and guidelines issued thereunder, these bye-laws, the Code of Conduct and directions given by the Governing Board.

 A member shall submit information about ongoing and concluded engagements as a RV, in the manner and format specified by the Organisation, at least twice a year stating inter alia, the date of assignment, date of completion and reference number of valuation assignment and valuation report.

 The Monitoring Committee shall review the information and records submitted by the members in accordance with the Monitoring Policy.

 RVO shall submit a report to IBBI in the manner specified by IBBI with information collected during monitoring, including information pertaining to –

(a) the details of the appointments made under the Act/these Rules,

(b) the transactions conducted with stakeholders during the period of his appointment;

(c) the transactions conducted with third parties during the period of his appointment; and

(d) the outcome of each appointment.

GRIEVANCE REDRESSAL MECHANISM

 RVO to have a Grievance Redressal Policy providing the procedure for receiving, processing, redressing and disclosing grievances against the Organisation or any member of the Organisation by-

(a) any member of the Organisation;

(b) any person who has engaged the services of the concerned members of the Organisation;

(c) any other person or class of persons as may be provided by the Governing Board.

 The Grievance Redressal Committee, after examining the grievance, may-

(a) dismiss the grievance if it is devoid of merit; or

(b) initiate a mediation between parties for redressal of grievance.

 The Grievance Redressal Committee shall refer the matter to the Disciplinary Committee, wherever the grievance warrants disciplinary action.

 The Grievance Redressal Policy shall provide for-

(a) the format and manner for filing grievances;

(b) maximum time and format for acknowledging receipt of a grievance;

(c) maximum time for the disposal of the grievance by way of dismissal, reference to the Disciplinary Committee or the initiation of mediation;

(d) details of the mediation mechanism

(e) provision of a report of the grievance and mediation proceedings to the parties to the grievance upon dismissal or resolution of the grievance;

(f) action to be taken in case of malicious or false complaints;

(g) maintenance of a register of grievances made and resolutions arrived at; and

(h) periodic review of the Grievance Redressal Mechanism

DISCIPLINARY PROCEEDINGS

 RVO may initiate disciplinary proceedings by issuing a show-cause notice against members-

(a) based on a reference made by the Grievances Redressal Committee;

(b) based on monitoring of members;

(c) following the directions given by the authority or any court of law; or

(d) suo moto, based on any information received by it.

 RVO to have a Disciplinary Policy, which shall provide for the following –

(a) the manner in which the Disciplinary Committee may ascertain facts;

(b) the issue of show-cause notice based on the facts;

(c) disposal of show-cause notice by a reasoned order, following principles of natural justice;

(d) timelines for different stages of disposal of show cause notice; and

(e) rights and obligations of the parties to the proceedings.

 The orders that may be passed by the Disciplinary Committee shall include-

(a) expulsion of the member;

(b) suspension of the member for a certain period of time;

(c) admonishment of the member;

(d) imposition of monetary penalty;

(e) reference of the matter to the authority, which may include, in appropriate cases, recommendation of the amount of restitution or compensation that may be enforced by the authority; and

(f) directions relating to costs.

 The Disciplinary Committee may pass an order for expulsion of a member if it has found that the member has committed-

(a) an offence under any law for the time being in force, punishable with imprisonment for a term exceeding 6 months, or an offence involving moral turpitude;

(b) a gross violation of the Act, rules, regulations and guidelines issued thereunder, bye-laws or directions given by the Governing Board which renders him not a fit and proper person to continue acting as a RV.

 Disciplinary Committee order be placed on the website of RVO within 7 days from passing of the said order, with one copy each being provided to each of the parties to the proceeding.

 Monetary penalty received by RVO under the orders of the Disciplinary Committee shall be used for the professional development.

 The Governing Board shall constitute an Appellate Panel consisting of one independent director of RVO, one member each from amongst the persons of eminence having experience in the field of law and field of valuation, and one member nominated by IBBI. Any person aggrieved of an order of the Disciplinary Committee may prefer an appeal before the Appellate Panel within 30 days from the receipt of a copy of the final order.

 The Appellate Panel shall dispose of the appeal in the manner it deems expedient, within 30 days of the receipt of the appeal.

 

SURRENDER OF MEMBERSHIP AND EXPULSION FROM MEMBERSHIP

01

 

02Eligibility qualification and Experience for Registration as Valuer

01

02

03

04

 

05

Temporary surrender, cancellation or suspension of registration as RV recognition as RVO

Temporary Surrender by RV [Rule-9]

Cancellation or suspension of registration of RV/recognition of RVO [Rule 15 to 17]

(1) In accordance with the bye-laws or
regulations, of RVO and on such
surrender, the valuer shall inform IBBI.
(2) RVO shall inform IBBI if any valuer
member has temporarily surrendered
or revived, not later than 7 days from
approval of the application for
temporary surrender or revival.
(3) Every RVO to place, on its website, in
a searchable format, names & other
details of its valuers members who have
surrendered or revived their
memberships.

By IBBI for violation of the provisions of Act, any other law allowing him to perform valuation, these rules or any condition of registration or recognition.
A complaint may be filed with IBBI in person or by post or courier along with a non-refundable fee of Rs.1000/- in favour of the authority. In case of a complaint against a RV, who is a partner of a PE or director of a company, IBBI may refer the complaint
to the relevant RVO and such organisation shall handle the complaint in accordance with its bye laws.

PROCEEDURE BY IBBI

 Upon finding of inspection or investigation or on a
complaint or on material available, authorised officer of IBBI is of the prima facie opinion that sufficient cause exists to cancel or suspend, issue show cause in writing
 If RVOs are professional institute, society or trust,
authorise office will ask information instead of inspection or investigation within given time in notice and also another opportunity. If still not responded, refer matter to central government.
 Contents of Show Cause
(a) Provisions of the Act & rules under which issued;
(b) Details of alleged facts;
(c) Details of evidence in support of alleged facts;
(d) Provisions of Act or rules or certificate of registration or recognition allegedly violated, or manner in which the public interest allegedly been affected;
(e) Actions or directions, IBBI proposes to take or issue if allegations are established;
(f) Manner of response to show-cause notice;
(g) consequences of failure to respond to the show-cause notice within the given time; and

(h) procedure to be followed for disposal of the show- cause notice.

 Service of Show cause
a) sending to RV or RVO at its registered address by
registered post with acknowledgment due; or
(b) an appropriate electronic means to the email address provided.
 IBBI to dispose by reasoned order & principal of natural justice followed.

 Show cause be disposed of by-
(a) no action;
(b) warning; or
(c) suspension or cancellation of the registration or recognition; or
(d) change in any one or more partner or director or the governing board of RVO.
 If RVO recognition is cancelled, order to specify the time within which its members may take membership of another RVO recognised for valuation of relevant asset class without prejudice to their registration.
 The order passed be issued to the concerned person immediately, & published on IBBI website.
 The order not become effective until 30 days have elapsed from the date of issue of the order unless stated otherwise
 Any person aggrieved by an order of the authorised officer, may prefer an appeal before IBBI.
[Explanation. ─ For the purposes of this rule, the authorised officer shall be an officer as may be specified by IBBI.

   

 

07

08

Valuation Examination [RULE-5]

IBBI itself or through a designated agency, for one or more asset classes, for individuals-
 Who possess the qualifications and experience and
 Completed educational courses as member of a RVO
 IBBI to recognise an educational course conducted by a RVO before its recognition.
 IBBI may recognise an examination conducted as part of a master’s or post graduate degree
course conducted by a University which is equivalent to the valuation examination.09

IBBI to determine the syllabus for various valuation specific subjects or assets classes for the valuation
examination on the recommendation of one or more Committee of experts

The syllabus, format and frequency of the valuation examination, including qualifying marks, shall be
published on the website of IBBI at least 3 months before examination.

MODEL CODE OF CONDUCT [Annexure-1]

 In business, follow high standards of integrity and fairness in dealings with clients & other valuers.  honest, straightforward, and forthright in all professional relationships  Provide true and adequate information, not misrepresent any facts or situations.  No action that would bring disrepute to profession.  keep public interest foremost  Render high standards of service, exercise due diligence, ensure proper care & exercise independent professional judgment.  Professional services as per specified technical & professional standards  Maintain professional knowledge and skill to provide competent professional service based on upto-date developments in practice, prevailing regulations/guidelines and techniques.  In valuation report, shall not disclaim liability for his/its expertise or deny his/its duty of care, except to the extent that the assumptions are based on statements of fact provided by the company or its auditors or consultants or information available in public domain and not generated by him  Not carry out any instruction of the client insofar as they are incompatible with the requirements of integrity, objectivity and independence.  Clearly state to his client the services that he would be competent to provide and the services for which he would be relying on other valuers or professionals or for which the client can have a separate arrangement with other valuers.  Act with objectivity in his/its professional dealings- decisions are made without the presence of any bias, conflict of interest, coercion, or undue influence of any party, whether directly connected to the valuation assignment or not.  Shall not take up an assignment if he/it or any of his/its relatives or associates is not independent in terms of association to the company.  Maintain complete independence in his/its professional relationships and shall conduct the valuation independent of external influences.  Disclose to the clients, possible sources of conflicts of duties and interests, while providing unbiased services.  Not deal in securities of any subject company after any time when he/it first becomes aware of the possibility of his/its association with the valuation, and in accordance with the Securities and Exchange Board of India (Prohibition of Insider Trading) Regulations, 2015 or till the time the valuation report becomes public, whichever is earlier.  Not indulge in “mandate snatching” or offering “convenience valuations” in order to cater to a company or client’s needs.  Shall not charge success fee.  In any fairness opinion or independent expert opinion submitted by a valuer, if there has been a prior engagement in an unconnected transaction, the valuer shall declare the association with the company during the last 5 years. MODEL CODE OF CONDUCT [Annexure-1]  Not use or divulge to other clients or any other party any confidential information about the subject company, which has come to his/its knowledge without proper and specific authority or unless there is a legal or professional right or duty to disclose.  Maintains written contemporaneous records for any decision taken, the reasons for taking the decision, and the information and evidence in support of such decision. This shall be maintained so as to sufficiently enable a reasonable person to take a view on the appropriateness of his/its decisions and actions.  Appear, co-operate and be available for inspections and investigations carried out by IBBI, any person authorised by the authority, RVO with which he/it is registered or any other statutory regulatory body.  provide all information and records as may be required by IBBI, the Tribunal, Appellate Tribunal, the RVO with which he/it is registered, or any other statutory regulatory body.  While respecting the confidentiality of information, shall maintain proper working papers for a period of 3 years or such longer period as required in its contract for a specific valuation, for production before a regulatory authority or for a peer review. In the event of a pending case before the Tribunal or Appellate Tribunal, the record shall be maintained till the disposal of the case.  A valuer or his/its relative not accept gifts or hospitality which undermines or affects his independence as a valuer. Relative’ shall have the same meaning as defined in clause (77) of Section 2 of the Companies Act, 2013 (18 of 2013).  shall not offer gifts or hospitality or a financial or any other advantage to a public servant or any other person with a view to obtain or retain work for himself/ itself, or to obtain or retain an advantage in the conduct of profession for himself/ itself.  Provide services for remuneration which is charged in a transparent manner, is a reasonable reflection of the work necessarily and properly undertaken, and is not inconsistent with the applicable rules.  Not accept any fees or charges other than those which are disclosed in a written contract with the person to whom he would be rendering service.  Refrain from accepting too many assignments, if he/it is unlikely to be able to devote adequate time to each of his/ its assignments.  Shall not conduct business which in the opinion of the authority or the registered valuer organisation discredits the profession. 

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