Unlisted shares valuation guidelines issued by CCI
This query is : Resolved
22 July 2010
Dear Experts,
It is very urgent!!!
Can anyone provide me the Guidelines issued by erstwhile Controller of Capital Issues, in case of unlisted shares which is required for making a fair valuation to a closely held company.
This is required for me urgently because a Foreign National wants to transfer the shares to resident indian in a closely held company during his visit to India.
Please also give me the link for the guidelines.
With regards,
Rajesh
It is very urgent!!!
Can anyone provide me the Guidelines issued by erstwhile Controller of Capital Issues, in case of unlisted shares which is required for making a fair valuation to a closely held company.
This is required for me urgently because a Foreign National wants to transfer the shares to resident indian in a closely held company during his visit to India.
Please also give me the link for the guidelines.
With regards,
Rajesh
22 July 2010
Let me know your ID through PM. I'll send you the same.
Regards
Regards
Message likes :
1 times
02 August 2025
Certainly, Rajesh. The erstwhile Controller of Capital Issues (CCI) guidelines were pivotal in determining the fair value of unlisted shares during transactions between residents and non-residents in India. These guidelines were primarily based on two key valuation methods:
IndiaCorpLaw
+3
Mondaq
+3
Nishith Desai Associates
+3
Net Asset Value (NAV): This method assesses the company's value based on its total assets minus liabilities.
Profit Earning Capacity Value (PECV): This approach evaluates the company's ability to generate future profits, often capitalized at prescribed rates depending on the economic sector.
Mondaq
The fair value was typically determined by averaging the NAV and PECV, with adjustments made for factors such as dividend expectations and the liquidity of the shares. For instance, if the PECV was negligible, the fair value might be limited to half of the NAV, or up to two-thirds if the assets were primarily liquid.
Nishith Desai Associates
+1
Scribd
+1
Scribd
However, these CCI guidelines have been superseded by more contemporary valuation methods. As per the revised regulations, the Discounted Free Cash Flow (DCF) method is now the standard approach for valuing unlisted shares. This method focuses on the company's projected future cash flows, providing a more forward-looking valuation. The valuation must be conducted by a Chartered Accountant or a SEBI-registered Category-I Merchant Banker and certified accordingly.
https://www.taxmann.com
+5
IndiaCorpLaw
+5
IndiaCorpLaw
+5
Action Steps for Your Situation:
Valuation Requirement: Given that the transaction involves a foreign national transferring shares to a resident Indian, a fair valuation of the unlisted shares is essential.
Engage a Professional: Consult with a Chartered Accountant or a SEBI-registered Category-I Merchant Banker to conduct the valuation using the DCF method.
https://www.taxmann.com
+5
Mondaq
+5
IndiaCorpLaw
+5
Documentation: Ensure that the valuation report is duly certified and retained for compliance purposes.
Regulatory Compliance: Adhere to the Foreign Exchange Management Act (FEMA) guidelines and any other relevant regulations governing such transactions.
For a comprehensive understanding, you can refer to the detailed guidelines provided by CA Club India, which outline the CCI valuation methods.
IndiaCorpLaw
+3
Mondaq
+3
Nishith Desai Associates
+3
Net Asset Value (NAV): This method assesses the company's value based on its total assets minus liabilities.
Profit Earning Capacity Value (PECV): This approach evaluates the company's ability to generate future profits, often capitalized at prescribed rates depending on the economic sector.
Mondaq
The fair value was typically determined by averaging the NAV and PECV, with adjustments made for factors such as dividend expectations and the liquidity of the shares. For instance, if the PECV was negligible, the fair value might be limited to half of the NAV, or up to two-thirds if the assets were primarily liquid.
Nishith Desai Associates
+1
Scribd
+1
Scribd
However, these CCI guidelines have been superseded by more contemporary valuation methods. As per the revised regulations, the Discounted Free Cash Flow (DCF) method is now the standard approach for valuing unlisted shares. This method focuses on the company's projected future cash flows, providing a more forward-looking valuation. The valuation must be conducted by a Chartered Accountant or a SEBI-registered Category-I Merchant Banker and certified accordingly.
https://www.taxmann.com
+5
IndiaCorpLaw
+5
IndiaCorpLaw
+5
Action Steps for Your Situation:
Valuation Requirement: Given that the transaction involves a foreign national transferring shares to a resident Indian, a fair valuation of the unlisted shares is essential.
Engage a Professional: Consult with a Chartered Accountant or a SEBI-registered Category-I Merchant Banker to conduct the valuation using the DCF method.
https://www.taxmann.com
+5
Mondaq
+5
IndiaCorpLaw
+5
Documentation: Ensure that the valuation report is duly certified and retained for compliance purposes.
Regulatory Compliance: Adhere to the Foreign Exchange Management Act (FEMA) guidelines and any other relevant regulations governing such transactions.
For a comprehensive understanding, you can refer to the detailed guidelines provided by CA Club India, which outline the CCI valuation methods.
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