16 November 2009
a new compnay is formed to take over the three existing proprietory (sister) concerns. what are the modalities that are required to be taken care off in the execution of such take over
16 November 2009
The problem obviously comes up if the proprietors are different in all the concerns and the taking over of the businesses of all three concerns involves transferring of movable properties, immovable properties and intangibles that attract capital gains tax. You will not be able to comply with the condition of each proprietor having over 50% of voting shares in the new company to take advantage of Section 47 that considers these takeovers as not being transfers. therefore if there are 3 proprietorship concerns with different proprietors, you need 3 companies or transfer the existing businesses all 3 to one company and let each proprietor or any 2 acquiring lower than 50% share pay the Capital gains Tax. Only one of the proprietors will be able to acquire over 50% shares in the new company.
CAclubindia
