Business Valuation

Valuation of business is required during any transaction regarding acquisition, disposal, merger, demerger, internal group restructuring, issuance of right shares, preferential allotment of shares, Private placement, Sweat equity shares, Employ Stock Option Scheme (ESOP) under various laws like Companies Act, 2013 ("Companies Act"), Income-tax Act, 1961 ("IT Act"), Foreign Exchange Management Act, 1999 ("FEMA"), SEBI, etc.

GSAP provides the following valuation services:

1. Independent Business Valuation

  • • Business valuations
  • • Angel investment, venture capital funding and Private Equity funding
  • • Foreign Direct Investment (FDI)
  • • Valuation under exchange control regulations (FEMA)
  • • Collaborations
  • • Franchise arrangements
  • • Arbitration and litigation Support
  • • Mergers & Acquisitions (M&A)
  • • Family settlement & succession planning
  • • Derivatives valuation and share based compensation
  • • Intellectual Property valuation
  • • Goodwill and Intangible Asset impairment
  • • Tax valuations
  • • Startup valuation

2. Valuation under the Companies Act, 2013

  • • Issue of share capital on preferential basis
  • If any company proposes to issue new shares on preferential basis, the price of such shares or other securities should not be less than the price determined on the basis of the valuation report obtained from a Registered Valuer [Section 62(1)(c)].

  • • Non-cash transactions involving directors
  • A company can enter into an arrangement by which a Director of the company or its holding, subsidiary or associate company or a person connected with him/her or the company itself acquires / is to acquire assets for consideration other than cash. In such cases the value of the assets has to be calculated by a Registered Valuer [Section 192(2)].

  • • Power to compromise or make arrangements with creditors and members (including Merger and Amalgamation of companies)
  • In case a compromise or an arrangement is proposed between a company and its creditors or between a company and its members, then an application is to be made to the National Company Law Tribunal ("NCLT") which could order a meeting of the creditors or members involved in such an arrangement. The application to the NCLT should include a valuation report in respect of the shares and property and all assets, tangible and intangible, movable and immovable, of the company by a Registered Valuer [Section 230(2)(v), 230(3) and 232].

  • • Purchase of minority shareholding
  • In case an acquirer or any person becomes a registered holder of 90 percent or majority of equity share capital of a company by virtue of an amalgamation, shares exchange, conversion of securities or by any other reason, then such a holder should notify the company of its intention to buy the remaining equity shares (minority shareholders). The minority shareholders are required to be paid for the equity shares held by them at a price determined on the basis of valuation by the Registered Valuer [Section 236(2)].

  • • Submission of report by a Company Liquidator
  • In case the NCLT has made a winding up order or has appointed a Company Liquidator, then such a Company Liquidator is required to submit a report to the NCLT which should include the value of the assets held by the company. The valuation of the assets should be determined by a Registered Valuer [Section 281(1)(a)].

3. The Insolvency and Bankruptcy Code, 2016

  • • Voluntarily Liquidation
  • In case of voluntarily liquidation of a corporate person, a declaration from majority of its directors verified by an affidavit which state that the full enquiry of the company's affairs has been done and the company has no debt or they will be able to pay its debts in full form the proceeds of assets sold in voluntary liquidation. Such a declaration would be valid only if it meets the prescribed conditions which includes report of the valuation of the assets of the company prepared by a Registered Valuer [Section 59(3)].

  • • Corporate Insolvency Resolution Process
  • In case a petition is filed with the NCLT for the insolvency of a company, then the Resolution Professional is required to get the assets of the company valued from Registered Valuer [Regulation 27 and 35 of CIRP Regulation].

4. Valuation under Income-tax Act, 1961

  • • Full value of consideration for transfer of unquoted equity shares
  • In case of transfer of unquoted equity shares, full value of consideration of such shares is to be determined as per the method prescribed in Rule 11UA(1)(c)(b) of the Income Tax Rules, 1962 ("the Rules") [Section 50CA and 56(2)(x)].

    In case of transfer of unquoted preference share, full value of consideration of such shares should be determined as per the method prescribed in Rules 11UA(1)(c)(c) of the Rules. A valuation report is required, which will be issued by a Chartered Accountant or a Merchant Banker [Section 50CA and 56(2)(x)].

  • • Issuance of unquoted equity shares
  • In case of issuance of new unquoted equity shares by a closely held company which are issued to a resident shareholder on premium, value of such share should not be more than fair market value. Fair market value is to be calculated as per the method prescribed in Rule 11UA(2) of the Rules. A valuation report is required, which is to be issued by a Merchant Banker [Section 56(2)(viib)].

    GSAP partners are Registered Valuer and it has tie-ups with Merchant Bankers for valuation purposes.