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Valuation– Legalities and Practicalities

Valuation– Legalities and Practicalities. CA. Prasad S. Kulkarni Perpetuity Analytics Pvt. Ltd. PRE NCLT ERA. C onsolidation. NCLT. Advantages. NCLT is a specialized court only for Corporate in India. There is no other tribunal/forum for corporate disputes.

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Valuation– Legalities and Practicalities

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  1. Valuation– Legalities and Practicalities CA. Prasad S. Kulkarni Perpetuity Analytics Pvt. Ltd.

  2. PRE NCLT ERA Private & Confidential

  3. Consolidation NCLT Private & Confidential

  4. Advantages • NCLT is a specialized court only for Corporate in India. • There is no other tribunal/forum for corporate disputes. • Will reduce multiplicity of litigation. • It consists of both judicial and technical members to decide on matters. • Considerable reduction in time taken. Private & Confidential

  5. Inception of Insolvency Laws in India Presidency Towns Insolvency Act, 1909 COMPANIES ACT, 2013 IBC, 2016 Provincial Insolvency Act, 1920 SARFAESI, 2002 Recovery of Debts due to Banks Act, 1993 SICA, 1985 Private & Confidential

  6. Instances Private & Confidential

  7. Need for Registered Valuer The Companies Act, 2013 had introduced concept of ‘REGISTERED VALUERS’ under Chapter XVII What is the need of Registered Valuers? Where a valuation is required to be made in respect of a) any property, stocks, shares, debentures, securities or goodwill or any other assets (herein referred to as the assets) or b) net worth of a company or its liabilities under the provision of this Act, it shall be valued by a person having such qualifications and experience and registered as a valuer in such manner, on such terms and conditions as may be prescribed and appointed by the audit committee or in its absence by the Board of Directors of that company. Private & Confidential

  8. Valuation- Income Tax Act 1961 Private & Confidential

  9. Rule 11UA – Asset Method Private & Confidential

  10. Start up Exemption • LLP or Limited Liability Company • Period to recognize being 10 years from the date of incorporation or registration • Turnover for any financial year from incorporation not exceeded Rs.100 Crores • Working towards innovation, development or improvement of products, processes or services or with high potential of employment or wealth creation • Recognised as eligible Startup by DPIIT • Aggregate amount of paid up share capital and share premium of the startup after issue or proposed issue of share, if any, does not exceed, twenty five crore rupees Private & Confidential

  11. Contd…. Provided that in computing the aggregate amount of paid up share capital, the amount of paid up share capital and share premium of twenty five crore rupees in respect of shares issued to any of the following persons shall not be included (a) a non-resident; or (b) a venture capital company or a venture capital fund; (c) Specified company whose shares are frequently traded within the meaning of Securities and Exchange Board of India (Substantial Acquisition of Shares and Takeovers) Regulations, 2011 and whose net worth on the last date of financial year preceding the year in which shares are issued exceeds one hundred crore rupees or turnover for the financial year preceding the year in which shares are issued exceeds two hundred fifty crore rupees. Private & Confidential

  12. Cont… It has not invested in any of the following assets, (a) building or land appurtenant thereto, being a residential house. (b) loans and advances, other than loans or advances extended in the ordinary course of business. (d) capital contribution made to any other entity; (e) shares and securities; (f) a motor vehicle, aircraft, yacht or any other mode of transport, the actual cost of which exceeds ten lakh rupees. other than in the ordinary course of business; (g) jewellary other than that held by the Startup as stock-in-trade in the business; (h) any other asset of the nature specified in section 56 of the Act. Provided the Startup shall not invest in any of the assets specified in sub-clauses (a) to (h) for the period of seven years from the end of the latest financial year in which shares are issued at premium; Declaration in Form 2 to DIPP that it fulfills the conditions mentioned above Private & Confidential

  13. Valuation Process Private & Confidential

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  15. Valuation Process Continued …….. Private & Confidential

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  19. Challenges Faced • Fixed Asset Register missing • Assets missing specially inventory • Land documents with owners and cannot be shared • Riots at Factory, physical verification impossible • Brand valuation but brand itself under litigation • Forecasts through the roof for a good valuation • Objects of valuation not achieved, no payment • Discounts on lack of marketing/minority interest not acceptable • Visit not preferred by clients. • Generic products portrayed as Special ones. Private & Confidential

  20. Valuation Myths • I only need a business valuation if I am selling my business. • I have a business valuation from several years ago, so I do not need a new one. • I don’t need to pay someone to do a valuation because I can use a free online valuation calculator. • All business valuations are completed the same way. • I know my business better than anyone else, so I don’t need someone to tell me what it’s value is. • Valuation is complicated and there are hundreds of models out there • The more quantitative a model, the better the valuation • Loss Making businesses do not have value. Private & Confidential

  21. Contact: 7722045672 Private & Confidential

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