Takeover over proprietory concern by Pvt Ltd Company

This query is : Resolved

VINITHA RAJESH (Querist)
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21 July 2011 Hi,
Please give your comments and advice for the case given below.

A person started an agricultural business in his individual capacity. Some of his relatives and friends helped him with financial support. All these people together incorporated a company with its main object to carry on agricultural business. The proprietor mentioned above is a shareholder cum director in the company. The company want to take over the proprietor's business. They have two options.

1. To consider the expenses till date as pre-operating expenses (Around Rs. 10 Lakhs)of the company and to carry on the business as companies business.

2. To enter into an agreement with the proprietor who is also a shareholder-director in the company for takeover of the business with a consideration (share or cash)

Which option would be better?

When I went through the topic for conversion of proprietory concern to private limited company they specify that
a. the conversion should be mentioned in the main object clause of MOA of the company
b. The consideration should be in shares only
c. The proprietor cum shareholder should have 50 % share in the company and should be maintained for 5 years.

Is this correct and will the above mentioned takeover be considered as conversion?

C A S.S.Agarwal, M.Com.,LL.B,

C A S.S.Agarwal, M.Com.,LL.B, (Expert)
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21 July 2011 Yes this is correct. Why do you want to convert it into a private limited company. What will happen to the land. You will be covered by MAT under income tax.

Transfer of land to the company will invite for payment of stamp duty

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