Please enlighten your views on below:
Mr. A has an idea which is worth 100 crores. Mr. B, Mr. C, Mr. D, Mr. E (investors) are convinced by the idea and are ready to invest full 100 crores on idea.
Mr. A has no money to invest and wants to retain 75% ownership in the company. How can he do so?
Mr A’s idea is worth 5-10 lakhs inr.
Owners equity= legal ownership over assets after deducting liabilities.
Who ever invests, their share of profits, assets and liabilities are proportional.
No chance that he can take over 75% ownership.
What if B, C, D, E opens up a private limited company (25 crores each) and transfer their proportion equity holding to A so that A now has 75% holding and B,C,D,E have total 25% holding. Is it possible ?
If A has the facility to inherit the stake through Indian law, it is possible. The partners capital account will be debited while transferring stake to A and A’s account will be credited. So this transaction is valid because the balance sheet equation is not disturbed here.
A can join the company like:
Bank a/c 100₹
To A’s capital a/c 0₹
To B capital a/c 25₹
To C capital a/c 25₹
To D capital a/c 25₹
To E capital a/c 25₹
(if law allows partner to join for free)
If the company law or Legal laws prohibit such a transfer, then, it is not possible.
KK & Company Chartered Accountant
Pune
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