Quick answer
Who can issue a valuation certificate for shares?
It depends on the law behind the valuation certificate. For shares issued or transferred to non-residents, a CA, a SEBI-registered merchant banker or a practising cost accountant may certify fair value. Valuations required by the Companies Act must come from an IBBI registered valuer, and some income tax methods are reserved for merchant bankers.
- FEMA pricing: CA, merchant banker or practising cost accountant
- Companies Act: IBBI registered valuer only
- Income tax: depends on the rule and method
- Practising CAs must put a UDIN on valuation reports
What is a valuation certificate and when is one needed?
A valuation certificate is a signed opinion of the value of shares, a business or an asset on a valuation date, prepared for one purpose. Companies need one when they issue shares to foreign investors, transfer shares across the residency line, make preferential allotments, merge, buy back shares or settle disputes over value.
Individuals and families meet it too: a parent gifting unlisted shares, partners exiting a family company, or an NRI selling shares of an Indian private company to a resident relative. For the broader advisory side of valuation, such as fundraising negotiations and methods, see our page on business valuation services. This page focuses on the certificate and who is legally allowed to sign it.
Valuation certificates signed by chartered accountants are attest work reserved for the profession. This page is information only; CA in Delhi does not quote fees for it or take on certification through this site.
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When does the Companies Act require a registered valuer?
Whenever the Companies Act 2013 or its rules require a valuation, section 247 and the Registered Valuers Rules 2017 require it to be done by a valuer registered with the Insolvency and Bankruptcy Board of India in the relevant asset class. A CA who is not a registered valuer cannot sign these.
| Provision | Situation |
|---|---|
| Section 62(1)(c) with Rule 13(1), Share Capital and Debentures Rules | Further issue of shares, including preferential allotment |
| Section 192(1) and (2) | Non-cash transactions involving directors |
| Section 230(2)(c)(v) and 230(3) | Compromises or arrangements with creditors and members |
| Section 232(2)(d) and 232(3)(h)(B) | Mergers and amalgamations |
| Section 236(2) | Purchase of minority shareholding |
| Section 281(1)(a) | Company liquidator's report |
| Rule 8, Share Capital and Debentures Rules | Issue of sweat equity shares |
| Rule 12(5), Prospectus and Allotment Rules | Return of allotment where consideration is not cash |
From Annexure I of IBBI circular IBBI/RVO/026/2019. Valuations under the Insolvency and Bankruptcy Code also need registered valuers.
What should a valuation report by CA contain?
A valuation report by CA or any valuer should state the purpose, the law relied on, the valuation date, the information used, the methods considered and chosen, key assumptions, the value per share, limitations, and the signatory's details with UDIN. A bare one-line certificate with a figure is weak evidence if questioned later.
| Section | What to look for |
|---|---|
| Engagement details | Who appointed the valuer, the purpose and the applicable law or rule |
| Valuation date | Close to the transaction, and stated clearly |
| Company background | Business, shareholding pattern and recent share issues |
| Sources of information | Audited accounts, management projections, market data and site visits |
| Methods | Income, market and asset approaches considered, with reasons for the choice |
| Assumptions | Growth, margins, discount rate and terminal value spelt out |
| Conclusion | Value per share and for the class of shares covered |
| Limitations and independence | Reliance on management data and a statement of no conflict |
| Signature | Name, registration or membership number, date and UDIN where a practising CA signs |
ICAI's FAQs on UDIN confirm that practising CAs registered as valuers must generate UDINs on their valuation reports too.
What documents are needed for a valuation certificate?
Expect to provide audited financial statements for two or three years, the latest management accounts, projections for discounted cash flow work, the current shareholding pattern, details of earlier share issues, the board resolution or term sheet, and the investor's residency details for foreign investment cases.
- Memorandum and articles, and the latest annual return filed with the ROC.
- Term sheet, share subscription or purchase agreement.
- Projections with assumptions, approved by management.
- Fixed asset register and any property valuations.
- Debt, contingent liabilities and pending litigation.
Allotments and transfers also trigger company filings; our ROC compliance page lists the forms that follow a share issue.
Common mistakes with valuation certificates
The mistakes that cause rejections or tax disputes are using the wrong signatory for the law involved, an outdated valuation date, projections the company never meets, values that swing sharply between close share issues, and a certificate without a UDIN from a practising CA.
- Getting a FEMA certificate from a CA and assuming it also covers a preferential allotment under the Companies Act.
- Valuing on a date months before allotment when results changed in between.
- Relying only on figures supplied by management without any testing; tribunals have discounted such reports.
- Issuing shares to a foreign investor below the certified fair value.
- Losing the working file, which is needed if the tax department questions the value later.
How do you choose a professional for a valuation certificate?
First identify the law behind the valuation, then confirm the signatory's status: ICAI membership and practice for a CA, IBBI registration in the securities or financial assets class for a registered valuer, or SEBI registration for a merchant banker. Ask for a draft with assumptions before the final report is signed.
Our guide to CA certificates explains how to verify a UDIN on ICAI's portal. Our directory of CA firms in Delhi lists firms with factual details only, and does not rank them or assign valuation work. If your company is based in Shalimar Bagh or nearby, the CA in Shalimar Bagh page covers that area.
Frequently asked questions
Can a chartered accountant issue a share valuation certificate?
Yes, for some purposes. Under rule 21 of the FEM (Non-debt Instruments) Rules 2019, a chartered accountant may certify the fair value of an unlisted company's shares for issue or transfer involving a non-resident. For valuations required by the Companies Act, the CA must also be an IBBI registered valuer.
Is a registered valuer needed for a private company's share allotment?
For a further issue of shares under section 62(1)(c), such as a preferential allotment, the price must be supported by a registered valuer's report under the Companies Act rules. Rights issues and ESOP schemes follow their own provisions, so check which route your allotment uses.
Who can value shares for FDI?
A chartered accountant, a SEBI-registered merchant banker or a practising cost accountant, using an internationally accepted pricing method on an arm's length basis. The issue price to a non-resident cannot be lower than that fair value.
Does a valuation certificate need a UDIN?
If a practising chartered accountant signs it, yes. ICAI requires UDINs on certificates, and its FAQs confirm that practising CAs registered as valuers must generate UDINs on their valuation reports as well. You can verify the UDIN on udin.icai.org.
How long is a valuation certificate valid?
No single law sets a validity period for every purpose. The value is as of a date, and the transaction should happen close to that date. If results, funding or market conditions change materially before the deal, get the valuation updated.
What is the difference between a valuation certificate and a net worth certificate?
A net worth certificate confirms assets minus liabilities from records on a date, usually for a bank or embassy. A valuation certificate estimates what shares or a business are worth using methods such as discounted cash flow or market comparables. See our net worth certificate guide for the first.
Is angel tax still relevant to share valuation?
The tax on share premium under section 56(2)(viib) was withdrawn by the Finance (No. 2) Act 2024. Valuation still matters for income tax where shares are received or transferred below fair market value, and for FEMA and Companies Act purposes.
Which valuation method is best for a start-up?
Early start-ups with little history are usually valued with discounted cash flow on projections or with market evidence from recent funding rounds. The law involved may restrict methods or signatories, so choose the method with the valuer, not before.
Can one valuation report serve FEMA, income tax and the Companies Act?
Only if the signatory is qualified under each law and the report meets each law's method and date requirements. In practice companies often need a registered valuer's report and a separate FEMA certificate for the same round.