Valuation of unsuited equity share

In India, the ability of a Chartered Accountant (CA) to perform a valuation of unlisted (unquoted) equity shares depends on the specific regulatory framework and the purpose of the valuation.

1. For Income Tax Purposes (Rule 11UA)

• Discounted Cash Flow (DCF) Method: Currently, CAs are not authorized to perform valuations under the DCF method for Income Tax purposes. A 2018 amendment to Rule 11UA restricted this role exclusively to SEBI-registered Merchant Bankers.

• Net Asset Value (NAV) Method: For the NAV method prescribed under Rule 11UA, there is no legal requirement for an external valuation report from a specific professional. An accountant or the company can compute the FMV based on audited financials. However, for documentation and tax compliance purposes, many businesses still engage professionals to certify these calculations.

2. For Companies Act, 2013

When a valuation is required under the Companies Act (e.g., for preferential allotments, sweat equity, non-cash consideration, or mergers), the valuation must generally be conducted by a Registered Valuer who is registered with the Insolvency and Bankruptcy Board of India (IBBI). A CA may be eligible to register as an IBBI valuer, but they must hold that specific registration to perform these statutory valuations.

3. For FEMA (Foreign Exchange) Purposes

When shares are transferred between a resident and a non-resident, the valuation must be compliant with Foreign Exchange Management Act (FEMA) pricing guidelines. In these cases, valuation is typically carried out by a SEBI-registered Merchant Banker or a Chartered Accountant holding a valid Certificate of Practice.

Summary Table

Disclaimer: This information is for general guidance based on current Indian regulations as of 2026. Because tax and corporate laws are subject to frequent amendments, it is recommended to consult with a qualified professional or your company secretary for specific transactions.

Summary: Whether a CA can value unlisted shares depends on the law: for Income Tax DCF valuations, only Merchant Bankers are authorized; for Companies Act requirements, an IBBI-registered valuer is needed; and for FEMA-related transfers, either a Merchant Banker or a CA with a certificate of practice can perform the valuation.