Slump Sale Consulting

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Wondering as  how one can sell a business entity as a going concern in India ? Usually a businessman seek for  an opportunity to revive business by selling it through a franchise or a trademark agreement rather than offering the whole concern in a slump sale agreement. But for an investor to invest in a franchise or through a trademark agreement is not as profitable as acquiring the original entity in full.

Even after making a huge payment to  franchisor or for trademark approvals, an uncertainty still persist that upon receiving a better deal, the first owner might sell his idea to some other investors also or he might be trapped in some other legal issues from the seller.

Getting into a Slump Sale agreement of business is much safer and profitable, than acquiring rights of any business through other means. Slump Sale agreement  is a transfer agreement of a business undertaking, wherein possession and the rights  over all assets as well as liabilities are transferred to  other person/entity and the whole concern/undertaking/division as a single unit is sold for the lumpsum consideration. This specifically means that the entity will remain in the business as such and the ownership/stake of the owners is transferred as a whole  without ascertaining the individual values  to available  assets and  resources.

Slump sale of an entity/business can be done to any corporate or non-corporate entity ; it can be a sale agreement of single undertaking or multiple undertakings ; the consideration in such an agreement is paid in lump sum not specifying any particular asset or allocating value to individual asset and is paid in consideration  either by cash or by issuing ownership rights in the business of transferee. When the consideration is paid by issuing  rights  in corresponding  business instead of cash  then  the transaction  is called slump exchange and not slump sale.

Slump Sale of Business in Legislations

Slump Sale is nothing but transfer of whole or part of business/undertaking as a going concern without any specific values being assigned to individual assets or liabilities.

Section 2(42C), Income Tax Act , 1961

The Act confers powers to the Board of Directors to sell, lease or otherwise dispose of whole undertaking of the company or where the company owns more than one undertaking of the whole or whole of any of its undertakings through passing a special resolution……

Section 180 , Companies Act, 2013

Profits or gains by way of slump sale of any undertaking shall be chargeable to capital gain tax arising from long term capital fixed assets, where net worth of the undertaking shall be considered as the cost of acquisition …..

Section 50B, Income Tax Act , 1961

A Slump Sale of business is committed by forming a “Business Transfer Agreement “  and  completion of simultaneous procedural compliance with numerous legal authorities including Stamp Duty authorities, Valuation authorities, State regulatory authorities and locally accepted procedures.

Why MN & Associates for Slump Sale Consultation ?

At MN & Associates, we have received appreciations in all legal matters and corporate solutions . In our Business Slump Sale Consultation package you get :

  • Tax Advisory;
  • Consultation on Corporate legislations;
  • Advisory on Stamp Duty Obligations;
  • Drafting of transfer agreement , disclosure agreements , owner agreements , declarations, supplementary documents, statements, audit reports ;
  • Advisory on raising funds, obtaining approvals from legal authorities, obtaining board approvals, ROC fillings and much more.

We are committed to help business owners with our proficiency in all regulations and compliance matters . We are never short of experts for advising on Slump Sale Agreements.

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