Cross-Border Share Pricing: Why FEMA Doesn't Recognise a Registered Valuer

Confirmed directly against Rule 21 of the Foreign Exchange Management (Non-Debt Instruments) Rules, 2019, the Pricing Guidelines that govern 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, shares transferred from a resident to a non-resident, and shares 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."

Checked directly against the full text of Rule 21: "registered valuer" does not appear anywhere in it. Three professionals are named, a Chartered Accountant, a SEBI-registered Merchant Banker, or a practising Cost Accountant, and only those 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 specifically, not even a Chartered Accountant or Cost Accountant qualifies.

This is not an oversight in the drafting. Section 247(1) of the Companies Act, 2013, the provision that creates the registered valuer credential in the first place, 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 for it. The Registered Valuer credential is not being denied to FEMA work. It is simply not the credential FEMA's own rule is asking for.

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 different rules under two different statutes, each writing its own closed list, and neither list happens to include "Registered Valuer."

This is not a gap to close or a case to make for extending the license. Cross-border share pricing under Rule 21 sits outside the IBBI Registered Valuer's sphere entirely, by the plain text of both the rule and Section 247 itself, and that is where the question ends. Whatever the merits of any particular FEMA valuation, they are not this practice's to weigh in on under this credential. For why that split exists between statutes at all, see Why India Carved Out a Separate Profession Just for Valuation.