Hey,
can someone guide me with the process of a company sale?
I am looking for selling my private limited company, just want to know what is the best process. I would also like to know what criteria should i consider while doing teh valuation of the company
thank you
Divya Agarwal
First, people usually follow dissolution accounting. They will sell off the assets, clear the out the liabilities and the residual net worth, also known as equity is the value of the firm.
The measurement criteria for disposals is ‘lower of carrying amount or FVLCS’. If you browse through IndAS, you will find details of disposals in a separate standard- Non current assets held for sale. Another standard emphasises on- Disposal of subsidiaries.
The closing of the business for unlisted companies is same as dissolution accounting again, i.e., profit or loss from disposal after settling all liabilities is taken and settled off with owners capital account. If it is a loss, the owner usually will go bankrupt and vice versa. Eg: after settling off liabilities, a company is worth 1 Million. Purchased the business with .5 million. Then profit on disposal of business is, one million minus half a million minus capital gains taxes.
https://mca.gov.in/Ministry/pdf/INDAS105.pdf
The above link prescribes treatment which can be used for disposal groups. Also INDAS 105 scope excludes some transaction which are included in the link.
I think it is best to take further advise from auditors.
Selling a private limited company in India can usually be done either through a share sale (transfer of shares to the buyer) or, less commonly, through a business/asset sale. In a share sale, due diligence is the first step, where the buyer reviews the company’s financials, compliance, contracts, and liabilities. This step is followed by valuation, negotiation, execution of a Share Purchase Agreement, filing share transfer documents with the MCA, and updating the statutory registers. Valuation is typically based on factors such as financial performance, assets and liabilities, future growth potential, industry position, and compliance status, using methods like discounted cash flow or net asset value. It is important to ensure clean statutory and tax compliance before selling your pvt ltd company. For the structured execution of a company sale, fair valuation, and end-to-end legal support, seeking professional assistance from an expert, such as Setindiabiz, is always advisable.
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