Merging of 2 private limited companies

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GEETA (Querist)
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18 November 2014 our company is going to merge with sister concern. i wanted to know how to calculate both directors share holdings and on which basis....

Amol S Joglekar

Amol S Joglekar (Expert)
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18 November 2014 There are 2 methods.
01. Based on the market value of the net assets
02. Market value of the shares.

Since this is a private company the second option is not available.

Based on this, decide the exchange ratio so that you will be able to find out the holding.

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GEETA

GEETA (Querist)
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19 November 2014 Thank you sir.

But can explain me with example. so i can understand much better as per companies situation.

Amol S Joglekar

Amol S Joglekar (Expert)
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19 November 2014 In fact, what I would suggest is, NOW you give the figures, so that we can go ahead with "market value" method.

GEETA

GEETA (Querist)
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20 November 2014
FOR EXAMPLE: 2 COMPANIES

ABC, XYZ
SHR.CAP 68.41, 50.00
RESERV & SURPLUS 477.65, 13.82
LONG TERM BORR. 245.11, 0.64
DFRD TAX 1.06, -
SHORT TERM BORR. 62.75, 248.70
TRADE PAYABLE/PROV. 125.00, 0.63
OTHER/CUR/LIAB. 42.75, 45.55

ASSETS:
FIXED ASSTS 763.76, 289.53
LONG TERM LAONS/ADV 4.75, 3.86
OTHER NON-CUR.AST - , 2.50
STOCK 111.44, 5.25
DEBTORS 99.79, 57.68
CASH 20.13, 0.51
SHRT TERM LOANS/ADV 20.75, -

Amol S Joglekar

Amol S Joglekar (Expert)
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21 November 2014 That is fine. Now find out the MARKE value of the ASSETs of both the companies.

GEETA

GEETA (Querist)
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22 November 2014 ABC - 1094.00, XYZ - 372.00

Amol S Joglekar

Amol S Joglekar (Expert)
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22 November 2014 Barring certain assumptions as to the taste and choice of the shareholders, this can be now worked out as the EXCHANGE RATION. (A rounding off is normally done in order to avoid the tedious calculations)Next difficulty in this regard please?