Cross-Border Share Pricing: Why FEMA Doesn't Recognise a Registered Valuer
A cross-border share deal is often framed as a choice between the IBBI valuation rules and FEMA's own pricing guidelines. It is not a choice. The registered valuer credential was never the credential FEMA asks for. This piece works from the text of Rule 21 of the Non-Debt Instruments Rules and the scope clause of Section 247, and explains why the omission is structural rather than an oversight.
Rule 21 Names Three Professionals
Confirmed directly against Rule 21 of the Foreign Exchange Management (Non-Debt Instruments) Rules, 2019, the Pricing Guidelines governing how an unlisted Indian company's shares are priced when a non-resident is on either side of the deal.
The same phrase repeats, almost word for word, across all three directions the rule covers — shares issued to a non-resident, transferred from a resident to a non-resident, and transferred from a non-resident to a resident. The price must be "the valuation of equity instruments done as per any internationally accepted pricing methodology for valuation on an arm's length basis duly certified by a Chartered Accountant or a Merchant Banker registered with the Securities and Exchange Board of India or a practising Cost Accountant."
'Registered Valuer' Does Not Appear in the Rule at All
Checked against the full text of Rule 21, the phrase is absent. Three professionals are named and only three.
A fourth transaction type sits inside the same rule with an even narrower list. Where equity instruments are swapped rather than sold for cash, "irrespective of the amount, valuation involved in the swap arrangement shall have to be made by a Merchant Banker registered with the Securities and Exchange Board of India or an investment banker outside India registered with the appropriate regulatory authority in the host country." For a swap, not even a Chartered Accountant or Cost Accountant qualifies.
Section 247 Was Never Drafted to Reach FEMA
This is not a drafting oversight. Section 247(1) of the Companies Act, 2013, the provision creating the credential, ties itself explicitly to valuations "required to be made... under the provision of this Act."
FEMA is a different statute administered by a different regulator, the Reserve Bank of India, not the Ministry of Corporate Affairs. A valuation required by Rule 21 is not a valuation required under the Companies Act, so Section 247's mandate never switches on. The credential is not being denied to FEMA work. It is simply not what FEMA's rule asks for.
Two Statutes, Two Closed Lists, Neither Naming a Valuer
This is the same shape of finding already covered for the income tax side of ESOP and sweat equity in ESOP Fair Valuation: Four Triggers, Four Different Rules: "Neither a Chartered Accountant nor an IBBI Registered Valuer satisfies this requirement. Merchant banker registration is a separate SEBI license, entirely apart from ICAI membership or IBBI registration."
Rule 3(8) names a merchant banker only. Rule 21 names a Chartered Accountant, a merchant banker, or a Cost Accountant. Two rules under two statutes, each writing its own closed list, and neither list includes "registered valuer."
What This Means in Practice
Do not offer a Section 247 valuation report for a Rule 21 pricing certificate, and do not accept one. Check which of the three named professionals is signing, and for a share swap check specifically for merchant banker or foreign investment banker registration, because the shorter list applies irrespective of amount.
This is not a gap to close or a case for extending the licence. Cross-border share pricing sits outside the registered valuer's sphere by the plain text of both the rule and Section 247 itself. For why that split exists between statutes at all, see Why India Carved Out a Separate Profession Just for Valuation.