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Unit 13: Valuation of Preference Shares

13.2.2 Valuation for Court Fees Notes

For purposes of court fees, if shares have a market value at the date of presentation of the plaint
then such market value will be taken into consideration. In case shares have no market value, the
value stated by the plaint is accepted for purposes of paying court fees.

13.2.3 Valuation for Probates

While petitioning for the grant of probate or letters of administration, the probate duty has to be
paid on the value of shares calculated at the price of day.
Although the price of the day is not explained, it seems that it means market price (Section 19-I
and Item 11 of Schedule I of Court Fees Act, 1870).

13.2.4 Valuation for Purposes of Bank Advances

Bankers value shares because against them they advance loans. They ascertain the value of
shares to measure the value of the security that will be provided by them. Generally, banks
give advances against quoted shares and therefore it is reasonable to base their value on market
quotations. In case, bankers are to advance loans against unquoted shares, their value has to be
estimated according to what they would fetch in the market.

13.2.5 Valuation of Shares under Companies Act, 1956

Amongst the information required to be furnished to the Central Government in connection with
the following matters are Valuation of Shares for Other Purposes Share Valuation the break-up
value of shares and the value of shares based on yield:

z z Acquisition of shares pursuant to Section 108A (1).
z z Proposal to transfer shares pursuant to Section 108B.
z z Transfer of shares of foreign companies pursuant to Section 108C.
The break-up value and the value based on yield have to be worked out in accordance with the
methods of calculation given in Annexure I and II of Forms 7D and 7E prescribed under Rule 5B
of the Companies (Central Government) General Rules and Forms issued under the Companies
Act, 1956. These are reproduced in Appendix ‘A’.

13.2.6 Valuation of Shares for Transfer/Issue of Shares by a Non-resident

Transfer/issue of shares by a non-resident is governed by regulations in the Foreign Exchange
Management Act, 1999, which also lay down restrictions for transfer/issue of shares by a non-
resident and provide a framework for valuation of shares. Valuation guidelines for different
types of transactions can be referred from Foreign Exchange Management Act, 1999 and the
applicable regulations.

13.2.7 Valuation of Shares for Fixation of their Issue Price

It is often necessary to value equity shares of companies for the purpose of fixation of price at
which the same should be issued in the primary market. The valuation exercise is also required
to be carried out for pricing the shares to be issued to foreign investors.

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