Preferential Allotment Valuation under Section 62(1)(c)

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A company that issues shares to selected investors makes a preferential allotment under section 62(1)(c) of the Companies Act, 2013, and for an unlisted company the price must rest on a registered valuer's report (Rule 13 of the Companies (Share Capital and Debentures) Rules, 2014). CA V. Viswanathan, IBBI Registered Valuer for securities or financial assets (IBBI/RV/03/2019/12333), prepares these reports, usually within 5–7 working days of complete information.

When is a preferential allotment valuation needed?

Whenever a company issues shares, or securities convertible into shares, to selected persons — angel or venture investors, strategic partners, promoters or employees outside an ESOP scheme — the issue is a preferential allotment under section 62(1)(c) of the Companies Act, 2013. For an unlisted company the price must be determined on the basis of a registered valuer's report (Rule 13 of the Companies (Share Capital and Debentures) Rules, 2014). When the offer is made by private placement, section 42 and Rule 14 of the Prospectus and Allotment Rules apply as well.

What are the steps?

Step	What happens	Law
1. Board approval	Board approves the issue, the valuer's appointment and the draft explanatory statement	Sections 42 and 62(1)(c)
2. Valuation	Registered valuer's report on the price per share	Rule 13, Share Capital Rules
3. Special resolution	Shareholders pass a special resolution; the explanatory statement discloses the price, the basis on which it was arrived at with the valuer's report, the allottees and the post-issue shareholding	Section 62(1)(c); Rule 13(2)(d)
4. ROC filing	Form MGT-14 within 30 days of the special resolution	Section 117
5. Offer and money	Offer letter in Form PAS-4 to identified persons; money received in a separate bank account	Section 42; Rule 14, Prospectus and Allotment Rules
6. Allotment	Within 60 days of receiving the money and within 12 months of the special resolution	Section 42(6); Rule 13
7. Return of allotment	Form PAS-3 within 15 days of allotment	Section 42(8); Rule 14, Prospectus and Allotment Rules
8. FEMA (if a non-resident invests)	Form FC-GPR within 30 days of issue	Regulation 4(1), FEMA reporting regulations

What does the valuation report contain?

The purpose and valuation date, the information relied on, the approaches considered and the methods chosen with reasons, the key assumptions, the sensitivity of value to them, and the conclusion of value per share, prepared under the valuation standards applicable to registered valuers. The board and shareholders rely on it to justify the price in the explanatory statement.

What if a foreign investor is in the round?

The same issue then also needs a FEMA Rule 21 fair-value certificate and an FC-GPR filing within 30 days of allotment. See FEMA Rule 21 valuation.

Registered valuer services by city

About V Viswanathan & Associates

Chartered Accountants, FRN 013713S— Practising since 2012 from G-131, Spencer Plaza, Anna Salai, Chennai.
IBBI Registered Valuer— Securities and financial assets, CA V. Viswanathan (IBBI/RV/03/2019/12333).
FCA, ACS, CFE— Company law, tax and forensic accounting under one roof.
Across India— Served from Chennai through video consultations and digitally signed reports and filings.

Frequently Asked Questions

Does a private company need a registered valuer for issuing shares to investors?

Yes, if the shares are offered to selected investors rather than to all existing shareholders in proportion to their holdings. Section 62(1)(c) of the Companies Act, 2013 and Rule 13 of the Companies (Share Capital and Debentures) Rules, 2014 require the price to be determined on the basis of a registered valuer's report.

Is a valuation needed for a rights issue?

No. A rights issue under section 62(1)(a) is offered to existing shareholders in proportion to their holdings and does not need a registered valuer's report.

What resolution is needed?

A special resolution of the shareholders, with an explanatory statement that discloses, among other things, the price, the basis on which it was arrived at and the valuation report (Rule 13).

How quickly must the shares be allotted?

Within twelve months of the special resolution (Rule 13 of the Share Capital Rules). If the offer is made by private placement, the shares must also be allotted within 60 days of receiving the application money, or the money refunded within the next 15 days (section 42(6) of the Companies Act, 2013).

Who can be a registered valuer for shares?

A person registered with IBBI in the securities or financial assets class under the Companies (Registered Valuers and Valuation) Rules, 2017. CA V. Viswanathan is registered as IBBI/RV/03/2019/12333.

Do you work with companies outside Chennai?

Yes. We work with companies across India from our office at Spencer Plaza, Anna Salai, Chennai, through video consultations, secure document sharing and digitally signed reports and filings. We do not have offices in other cities.

Law stated as at 27 Oct 2026. Official sources: FEMA and RBI directions (RBI), Companies Act, 2013 (MCA), Registered valuers (IBBI), Income-tax Act, 2025 and Rules, 2026 (CBDT). Reviewed by CA V. Viswanathan, FCA, ACS, CFE, IBBI Registered Valuer (IBBI/RV/03/2019/12333).